WPP (WPP) 20-F 2011 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

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

OR

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

For the fiscal year ended 31 December 2011

OR

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

For the transition period from                    to                    

OR

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

Date of event requiring this shell company report                    

Commission file number 0-16350

WPP plc

(Exact Name of Registrant as specified in its charter)

Jersey

(Jurisdiction of incorporation or organization)

6 Ely Place

Dublin 2, Ireland

(Address of principal executive offices)

Andrea Harris, Esq.

Group Chief Counsel

6 Ely Place Dublin 2, Ireland

011-353-1-669-0333

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

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

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

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

Ordinary Shares of 10p each

(Title of Class)

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

(Title of Class)

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

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

At December 31, 2011, the number of outstanding ordinary shares was 1,266,373,821 which includes at such date ordinary shares represented by 9,715,724 ADSs.

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

YES  x    NO  ¨

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

YES  ¨    NO  x

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  x    NO  ¨

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

YES  ¨    NO  ¨

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

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

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

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

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

Item 17  ¨    Item 18  ¨

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

YES  ¨    NO  x

TABLE OF CONTENTS

			Page
FORWARD – LOOKING STATEMENTS				1
Part I				1
Item 1	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS			1
Item 2	OFFER STATISTICS AND EXPECTED TIMETABLE			1
Item 3	KEY INFORMATION			1
	A	Selected Financial Data		1
	B	Capitalization and Indebtedness		4
	C	Reasons for the Offer and Use of Proceeds		4
	D	Risk Factors		5
Item 4	INFORMATION ON THE COMPANY			7
	A	History and Development of the Company		7
	B	Business Overview		8
	C	Organizational Structure		13
	D	Property, Plant and Equipment		15
Item 4A	UNRESOLVED STAFF COMMENTS			15
Item 5	OPERATING FINANCIAL REVIEW AND PROSPECTS			16
	A	Operating Results		16
	B	Liquidity and Capital Resources		23
	C	Research and Development, Patents and Licenses		25
	D	Trend Information		25
	E	Off-Balance Sheet Arrangements		26
	F	Tabular Disclosure of Contractual Obligations		26
Item 6	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES			36
	A	Directors and Senior Management		36
	B	Compensation		38
	C	Board Practices		54
	D	Employees		58
	E	Share Ownership		59
Item 7	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS			60
	A	Major Shareholders		60
	B	Related Party Transactions		60
	C	Interests of Experts and Counsel		60
Item 8	FINANCIAL INFORMATION			61
	A	Consolidated Statements and Other Financial Information		61
	B	Significant Changes		62
Item 9	THE OFFER AND LISTING			63
	A	Offer and Listing Details		63
	B	Plan of Distribution		64
	C	Markets		64
	D	Selling Shareholders		64
	E	Dilution		64
	F	Expenses of the Issue		64

			Page
Item 10	ADDITIONAL INFORMATION			65
	A	Share Capital		65
	B	Memorandum and Articles of Association		65
	C	Material Contracts		72
	D	Exchange Controls		75
	E	Taxation		75
	F	Dividends and Paying Agents		83
	G	Statements by Experts		83
	H	Documents on Display		83
	I	Subsidiary Information		83
Item 11	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			84
Item 12	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES			84
	A	Debt Securities		84
	B	Warrants and Rights		84
	C	Other Securities		84
	D	American Depositary Shares		85
Part II				87
Item 13	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES			87
Item 14	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS			87
Item 15	CONTROLS AND PROCEDURES			87
Item 16A	AUDIT COMMITTEE FINANCIAL EXPERT			89
Item 16B	CODE OF ETHICS			89
Item 16C	PRINCIPAL ACCOUNTANT FEES AND SERVICES			90
Item 16D	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES			90
Item 16E	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS			90
Item 16F	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT			91
Item 16G	CORPORATE GOVERNANCE			91
Part III				92
Item 17	FINANCIAL STATEMENTS			92
Item 18	FINANCIAL STATEMENTS			92
Item 19	EXHIBITS			92

Forward-Looking Statements

In connection with the provisions of the Private Securities Litigation Reform Act of 1995 (the ‘Reform Act’), the Company (as defined below) may include forward-looking statements (as defined in the Reform Act) in oral or written public statements issued by or on behalf of the Company. These forward-looking statements may include, among other things, plans, objectives, projections and anticipated future economic performance based on assumptions and the like that are subject to risks and uncertainties. As such, actual results or outcomes may differ materially from those discussed in the forward-looking statements. Important factors which may cause actual results to differ include but are not limited to: the unanticipated loss of a material client or key personnel, delays or reductions in client advertising budgets, shifts in industry rates of compensation, regulatory compliance costs or litigation, natural disasters or acts of terrorism, the Company’s exposure to changes in the values of major currencies other than the UK pound sterling (because a substantial portion of its revenues are derived and costs incurred outside of the United Kingdom) and the overall level of economic activity in the Company’s major markets (which varies depending on, among other things, regional, national and international political and economic conditions and government regulations in the world’s advertising markets). In addition, you should consider the risks described in Item 3D, captioned “Risk Factors,” which could also cause actual results to differ from forward-looking information. In light of these and other uncertainties, the forward-looking statements included in this document should not be regarded as a representation by the Company that the Company’s plans and objectives will be achieved.

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

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Overview

WPP plc and its subsidiaries (WPP) comprise one of the largest communications services businesses in the world. At 31 December 2011, the Group had 113,615 employees. Including all employees of associated companies, this figure was approximately 158,000. For the year ended 31 December 2011, the Group had revenue of £10,022 million and operating profit of £1,192 million.

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

A. Selected Financial Data

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

The selected income statement data for each of the three years ended 31 December 2011, 2010 and 2009 and the selected balance sheet data as at 31 December 2011 and 2010 are derived from the Consolidated Financial Statements of the Company that appear elsewhere in this Form 20-F. The selected financial data for prior periods

1

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

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

Selected Consolidated Income Statement Data

	Year ended 31 December
	2011			2010			2009			2008			2007
	£m			£m			£m			£m			£m
Revenue		10,021.8			9,331.0			8,684.3			7,476.9			6,185.9
Operating profit		1,192.2			973.0			761.7			876.0			804.7
Profit for the year		916.5			661.0			506.9			513.9			515.1
Profit attributable to equity holders of the parent		840.1			586.0			437.7			439.1			465.9
Earnings per ordinary share:
Basic		67.6	p		47.5	p		35.9	p		38.4	p		39.6	p
Diluted		64.5	p		45.9	p		35.3	p		37.6	p		38.0	p
Earnings per ADS1:
Basic		338.0	p		237.5	p		179.5	p		192.0	p		198.0	p
Diluted		322.5	p		229.5	p		176.5	p		188.0	p		190.0	p
Dividends per ordinary share		19.28	p		16.25	p		15.47	p		14.32	p		11.93	p
Dividends per ADS (US dollars)2		151.2	¢		126.7	¢		135.9	¢		139.5	¢		113.3	¢
1    Basic and diluted earnings per American Depositary Share (ADS) have been calculated using the same method as earnings per share, multiplied by a factor of five. 2    These figures have been translated for convenience purposes only, using the approximate average rate for the year shown in the exchange rate table on page 4. This conversion should not be construed as a representation that the pound sterling amounts actually represent, or could be converted into, US dollars at the rates indicated.

Selected Consolidated Balance Sheet Data

	At 31 December
	2011		2010		2009		2008		2007
	£m		£m		£m		£m		£m
Total assets		24,694.9		24,345.1		22,351.5		24,463.3		17,252.0
Net assets		6,894.3		6,647.9		6,075.7		5,959.8		4,094.8
Called-up share capital		126.6		126.4		125.6		125.5		119.2
Number of shares (in millions)		1,266.4		1,264.4		1,256.5		1,255.3		1,191.5

Dividends

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

2

The table below sets forth the amounts of interim, second interim and total dividends paid on the Company’s ordinary shares in respect of each fiscal year indicated. In the United States, the Company’s ordinary shares are represented by ADSs, which are evidenced by American Depositary Receipts (ADRs) or held in book-entry form. The Group uses the terms ‘ADS’ and ‘ADR’ interchangeably. The dividends are also shown translated into US cents per ADS using the average closing exchange rate for pounds sterling, as shown on page 4, for each year presented.

	Pence per ordinary share						US cents per ADS
In respect of the year ended 31 December:	First Interim		Second Interim1		Total		First Interim		Second Interim1		Total
2007		4.32		9.13		13.45		43.24		91.39		134.63
2008		5.19		10.28		15.47		48.07		95.21		143.28
2009		5.19		10.28		15.47		40.66		80.53		121.19
2010		5.97		11.82		17.79		46.15		91.37		137.52
2011		7.46		17.14		24.60		59.80		137.39		197.19
1    Income access share arrangements have been put in place by the Company. The mechanics of the income access share arrangements mean that the Company will declare a second interim rather than a final dividend. The Board has no plans to announce any additional dividend in respect of the year ended 31 December 2011.

The 2011 first interim dividend was paid on 14 November 2011 to share owners on the register at 14 October 2011. The 2011 second interim dividend will be paid on 9 July 2012 to share owners on the register at 8 June 2012.

Exchange rates

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

The following table sets forth for each of the most recent six months, the high and low exchange rates between the pound sterling and the US dollar. As at 20 April 2012, the closing exchange rate was 1.6124.

Month ended	High		Low
31 October 2011		1.6129		1.5392
30 November 2011		1.6083		1.5436
31 December 2011		1.5702		1.5399
31 January 2012		1.5749		1.5295
29 February 2012		1.5937		1.5664
31 March 2012		1.5991		1.5635

3

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

Year ended 31 December	Average
2007		2.0019
2008		1.8524
2009		1.5667
2010		1.5461
2011		1.6032

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for the Offer and Use of Proceeds

Not applicable.

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D. Risk Factors

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

Risk	Potential impact
Clients
The Group competes for clients in a highly competitive industry and client loss may reduce market share and decrease profits.	Competitors include large multinational advertising and marketing communication companies and regional and national marketing services companies. New market participants include database marketing and modelling companies, telemarketers and internet companies. Service agreements with clients are generally terminated by the client on 90 days’ notice and many clients put their advertising and communications business up for competitive review from time to time. The ability to attract new clients and to retain existing clients may also in some cases be limited by clients’ policies about conflicts of interest.
The Group receives a significant portion of its revenues from a limited number of large clients and the loss of these clients could adversely impact the Group’s prospects, business, financial condition and results of operations.	A relatively small number of clients contribute a significant percentage of the Group’s consolidated revenues. The Group’s 10 largest clients accounted for almost 17.2% of revenues in the year ended 31 December 2011. Clients generally are able to reduce advertising and marketing spend or cancel projects on short notice. The loss of one or more of the Group’s largest clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect the Group’s financial condition.
Sustainability issues
Damage to WPP’s reputation from undertaking controversial client work.	The operating companies may undertake controversial client accounts and may not always consider the impact on the Group.
Marketing ethics, compliance with marketing standards, and increasing transparency about our marketing practices.	Failure to comply with all laws and industry codes governing marketing material could impact the Group’s reputation or its relationship with clients.
Compliance with privacy and data protection regulations.	Failure to adequately protect data could impact the Group’s reputation and create risk of litigation. Increased regulation unless the operating companies meet best practice standards, contribute to the debate on privacy, increase transparency for consumers on how their data are obtained and used.
Climate change, including the emissions from energy used in our offices and during business travel.	Negative cost and reputational impact if the Group failed to meet target to reduce per head carbon intensity to 1.2 tonnes by 2020 (from 3.3 tonnes in 2006).
Economic
The Group’s businesses are subject to economic and political cycles. Many of the economies in which the Group operates (including the Eurozone) have significant economic challenges.	Reduction in client spending or postponing spending on the services offered by the Group or switching of client expenditure to non-traditional media and renegotiation of contract terms leading to reduced profitability and cash flow.
Financial
Currency exchange rate fluctuations could adversely impact the Group’s consolidated results.	The Company’s reporting currency is pounds sterling. Given the Group’s significant international operations, changes in exchange rates cause fluctuations in the Company’s results when measured in pounds sterling.
Changes to the Group’s debt issue ratings by the rating agencies Moody’s Investor Services and Standard and Poor’s Rating Service may affect the Group’s access to debt capital.	If the Company’s financial performance and outlook materially deteriorate, a ratings downgrade could occur and the interest rates and fees payable on certain of the Company’s revolving credit facilities and certain of our bonds could be increased.

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Risk	Potential impact
Financial (continued)
The Group may be unable to collect balances due from any client that files for bankruptcy or becomes insolvent.	The Group is generally paid in arrears for its services. Invoices are typically payable within 30 to 60 days. The Group commits to media and production purchases on behalf of some of its clients as principal or agent depending on the client and market circumstances. If a client is unable to pay sums due, media and production companies may look to the Group to pay such amounts to which it committed as an agent on behalf of those clients.
Mergers & Acquisitions
The Group may be unsuccessful in evaluating material risks involved in completed and future acquisitions and may be unsuccessful in integrating any acquired operations with its existing businesses.	The Group regularly reviews potential acquisitions of businesses that are complementary to its operations and clients needs. If material risks are not identified prior to acquisition or the Group experiences difficulties in integrating an acquired business, it may not realise the expected benefits from such acquisition and the Group’s financial condition could be adversely affected.
Goodwill and other intangible assets recorded on the Group’s balance sheet with respect to acquired companies may become impaired.	The Group has a significant amount of goodwill and other intangible assets recorded on its balance sheet with respect to acquired companies. The Group annually tests the carrying value of goodwill and other intangibles for impairment. The estimates and assumptions about results of operations and cash flows made in connection with impairment testing could differ from future results of operations and cash flows. Future events could cause the Group to conclude that the asset values associated with a given operation have become impaired which could have a material impact on the Group’s financial condition.
Operational
The Group operates in 107 countries and is exposed to the risks of doing business internationally.	The Group’s international operations are subject to exchange rate fluctuations, restrictions and/or taxation on repatriations of earnings, social, political and economic instability, conflicts of laws and interpretation of contracts.
People
The Group’s performance could be adversely affected if it were unable to attract and retain key talent or had inadequate talent management and succession planning for key management roles.	The Group is highly dependent on the talent, creative abilities and technical skills of our personnel as well as their relationships with clients. The Group is vulnerable to the loss of personnel to competitors and clients leading to disruption to the business.
Employment practices, including diversity and equal opportunities, business ethics, employee development, remuneration, communication and health and safety.	Failing to meet standards on diversity and gender would impact the perception of the Group and quality of work.
Regulatory/Legal
The Group may be subject to regulations affecting its activities.	Governments, government agencies and industry self-regulatory bodies from time to time adopt statutes and regulations that directly or indirectly affect the form, content and scheduling of advertising, public relations and public affairs and market research or otherwise limit the scope of the activities of the Group and its clients which could have a material adverse impact on our financial position. Changes in tax laws or their application may also adversely affect the Group’s reported results.
The Group may be exposed to liabilities from allegations that certain of its clients’ advertising claims may be false or misleading or that its clients products may be defective.	The Group may be, or may be joined as a defendant, in litigation brought against its clients in respect of services provided by the Group.
The Group operates in 107 countries and is subject to increased anti-corruption legislation and enforcement not only in the US and UK.	The Group may be exposed to liabilities in the event of breaches of anti-corruption legislation.
Civil liabilities or judgements against the Company or its directors or officers based on U.S. federal or state securities laws may not be enforceable in the U.S. or in England and Wales or in Jersey.	The Company is a public limited company incorporated under the laws of Jersey. Some of the Company’s directors and officers reside outside of the United States. In addition, a substantial portion of the directly owned assets of the Company are located outside of the United States. As a result, it may be difficult or impossible for investors to effect service of process within the United States against the Company or its directors and officers or to enforce against them any of the judgements, including those obtained in original actions or in actions to enforce judgements of the U.S, courts, predicated upon the civil liability provisions of the federal or state securities laws of the United States.

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ITEM 4. INFORMATION ON THE COMPANY

The Company operates through a number of established global, multinational and national advertising and marketing services companies that are organised into four business segments. Our largest segment is Advertising and Media Investment Management where we operate the well-known advertising networks Ogilvy & Mather Advertising, JWT, Y&R, Grey, bates and the United Network, as well as Media Investment Management companies such as MediaCom, MEC, Mindshare, Maxus and tenthavenue. Our other segments are Consumer Insight, where our operations are conducted through Kantar; Public Relations & Public Affairs, where we operate through well-known companies such as Burson-Marsteller, Cohn & Wolfe, Hill & Knowlton and Ogilvy Public Relations; and Branding & Identity, Healthcare and Specialist Communications, where our operations are conducted by B to D Group, ghg, Wunderman, Sudler & Hennessey, OgilvyOne Worldwide, Ogilvy CommonHealth Worldwide, G2, OgilvyAction, 24/7 Media and other companies.

The Company’s ordinary shares are admitted to the Official List of the UK Listing Authority and trade on The London Stock Exchange and American Depositary Shares (which are evidenced by ADRs or held in book-entry form) representing deposited ordinary shares are quoted on the NASDAQ Global Select Market (NASDAQ). At 19 April 2012 the Company had a market capitalisation of £10,833 million.

The Company’s executive office is located at 6 Ely Place, Dublin 2, Ireland, Tel: 011-353-1-669-0333 and its registered office is located at 22 Grenville Street, St Helier, Jersey, JE4 8PX.

A. History and Development of the Company

WPP plc was incorporated in Jersey on 12 September 2008.

On 19 November 2008, under a scheme of arrangement between WPP 2008 Limited (formerly WPP Group plc), (Old WPP), the former holding company of the Group, and its share owners under Part 26 of the Companies Act 2006, and as sanctioned by the High Court, all the issued shares in that company were cancelled and the same number of new shares were issued to WPP plc in consideration for the allotment to share owners of one ordinary share in WPP plc for each ordinary share in WPP 2008 Limited held on the record date, 18 November 2008. Citibank, N.A., depositary for the ADSs representing Old WPP ordinary shares, cancelled Old WPP ADSs held in book-entry uncertificated form in the direct registration system maintained by it and issued ADSs representing ordinary shares of the Company in book entry uncertificated form in the direct registration system maintained by it to the holders. Holders of certificated ADSs, or ADRs, of Old WPP were entitled to receive Company ADSs upon surrender of the Old WPP ADRs to the Depositary. Each Old WPP ADS represented five ordinary shares of Old WPP and each Company ADS represents five ordinary shares of the Company.

As part of the scheme of arrangement noted above, 1,252,652,646 ordinary shares were issued at a price of 340.75 pence each. On 24 November 2008 the entire balance standing to the credit of the share premium account was transferred to retained earnings as sanctioned by The Royal Court of Jersey. As a result £4,143.1 million was added to retained earnings for both WPP plc and the Group. For the Company this amount is distributable.

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

Old WPP became the holding company of the WPP Group on or about 25 October 2005 when the company now known as WPP 2005 Limited, the original holding company of the WPP Group, completed a reorganisation of its capital and corporate structure. WPP 2005 Limited (formerly WPP Group plc) was incorporated and registered in England and Wales in 1971 and is a private limited company under the Companies Act 1985, and until 1985 operated as a manufacturer and distributor of wire and plastic products. In 1985, new investors acquired a significant interest in WPP and changed the strategic direction of the Company from being a wire and plastics manufacturer and distributor to being a multinational communications services organisation. Since then, the

7

Company has grown both organically and by the acquisition of companies, most significantly the acquisitions of JWT Group, Inc. in 1987, The Ogilvy Group, Inc. in 1989, Young & Rubicam Inc. (Young & Rubicam or Young & Rubicam Brands, as the group is now known) in 2000, Tempus Group plc (Tempus) in 2001, Cordiant Communications Group plc (Cordiant) in 2003, Grey Global Group, Inc. (Grey) in 2005, 24/7 Real Media Inc (TFSM) in 2007 and Taylor Nelson Sofres plc (TNS) in 2008.

The Company spent £633.8 million (excluding cash and cash equivalents acquired), £295.9 million and £196.6 million for acquisitions and investments in 2011, 2010 and 2009, respectively, including payments in respect of loan note redemptions and earnout consideration resulting from acquisitions in prior years. For the same periods, cash spent on purchases of property, plant and equipment and other intangible assets was £253.2 million, £217.5 million and £253.3 million, respectively, and cash spent on share repurchases and cancellations was £182.2 million, £46.4 million and £9.5 million, respectively.

B. Business Overview

The Company’s business comprises the provision of communications services on a national, multinational and global basis. It operates from over 2,500 offices in 107 countries including associates. The Company organises its businesses in the following areas: Advertising and Media Investment Management; Consumer Insight; Public Relations & Public Affairs; and Branding & Identity, Healthcare and Specialist Communications (including direct, digital, promotion and relationship marketing).

Approximately 41% of the Company’s reported revenues in 2011 were from Advertising and Media Investment Management, with the remaining 59% of its revenues being derived from the business segments of Consumer Insight; Public Relations & Public Affairs; and Branding & Identity, Healthcare and Specialist Communications.

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

Revenue	2011				2010				2009
	£m		% of total		£m		% of total		£m		% of total
Advertising and Media Investment Management		4,157.2		41.5		3,733.3		40.0		3,420.5		39.3
Consumer Insight		2,458.0		24.5		2,430.2		26.0		2,297.1		26.5
Public Relations & Public Affairs		885.4		8.8		844.5		9.1		795.7		9.2
Branding & Identity, Healthcare and Specialist Communications		2,521.2		25.2		2,323.0		24.9		2,171.0		25.0
Total		10,021.8		100.0		9,331.0		100.0		8,684.3		100.0

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

Revenue	2011				2010				2009
	£m		% of total		£m		% of total		£m		% of total
North America1		3,388.2		33.8		3,299.8		35.3		3,010.0		34.7
United Kingdom		1,183.5		11.8		1,087.6		11.7		1,029.0		11.8
Western Continental Europe2		2,505.1		25.0		2,325.3		24.9		2,327.8		26.8
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		2,945.0		29.4		2,618.3		28.1		2,317.5		26.7
Total		10,021.8		100.0		9,331.0		100.0		8,684.3		100.0

¹  North America includes the US with revenues of £3,149.9 million (2010: £3,097.9 million, 2009: £2,835.8 million).

²  Western Continental Europe includes Ireland with revenues of £40.3 million (2010: £37.4 million, 2009: £43.4 million).

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

Advertising and Media Investment Management

Advertising – The principal functions of an advertising agency are the planning and creation of marketing and branding campaigns and the design and production of advertisements for all types of media such as television, cable, the internet, radio, magazines, newspapers and outdoor locations such as billboards.

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

Consumer Insight

To help optimise its worldwide research offering to clients, the Company’s separate global research and strategic marketing consultancy businesses are managed on a centralised basis under the umbrella of the Kantar Group. In 2009 the Kantar Group announced a major re-organisation to strengthen its position as the world’s leading consumer insight business and streamline its offer for clients. The re-organisation simplified the Group’s overall offering through a series of structural changes, building on the acquisition of TNS in October 2008. The Kantar Group offering includes: custom research in a wide range of business sectors and areas of marketplace information including strategic market studies; brand positioning; equity research; customer satisfaction surveys; product development; international research; advanced modeling; advertising research; pre-testing, tracking and sales modeling; and trends and futures research and consultancy.

Public Relations & Public Affairs

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

Branding & Identity, Healthcare and Specialist Communications

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

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

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

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

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

Manufacturing

The original business of the Group remains as the manufacturing division, which operates through subsidiaries of Wire and Plastic Products Limited. The division produces a wide range of products for commercial, industrial and retail applications.

WPP Head Office

WPP, the parent company, with its offices in Dublin, London, New York, Tokyo, Hong Kong, Shanghai and São Paulo develop the professional and financial strategy of the Group, promote operating efficiencies, coordinate cross referrals of clients among the Group companies and monitor the financial performance of its operating companies. The principal activity of the Group continues to be the provision of communications and marketing services worldwide. WPP acts only as the parent company and does not trade. The parent company complements the operating companies in three distinct ways.

• First, the parent company relieves them of much administrative work. Financial matters (such as planning, budgeting, reporting, control, treasury, tax, mergers, acquisitions, investor relations, legal affairs and internal audit) are co-ordinated centrally. For the operating companies, every administrative hour saved is an extra hour to be devoted to the pursuit of professional excellence.

• Second, the parent company encourages and enables operating companies of different disciplines to work together for the benefit of clients. Such collaborations have the additional benefit of enhancing the job satisfaction of the Company’s people. The parent company also plays an across-the-Group role in the following functions: the management of talent, including recruitment and training; in property management; in procurement and information technology; in knowledge sharing and practice development with an increasing emphasis on corporate responsibility and sustainability.

• And, finally, the parent company itself can function as the 21^st century equivalent of the full-service agency. For some clients, predominantly those with a vast geographical spread and a need for marketing services ranging from advertising through design and website construction to research and internal communications, the parent company can act as a portal to provide a single point of contact and accountability.

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

WPP Strategy

Our reason for being, the justification for WPP’s existence, continues to be to add value to our clients’ businesses and our people’s careers. Our goal remains to be the world’s most successful provider of communications services to multinational and local companies, not just the largest.

The Group has three key strategic priorities.

• First, with the financial crisis of 2008 now hopefully behind us, and with margins now equal to historic pro-forma (the term defined on page 27) highs, our immediate goal is to deliver annual EPS (Earnings

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per Share) growth of 10-15% through organic revenue growth of up to 5%, margin improvement of 0.5 margin points or more, and productive use of our cash flow. Compared with the last downturn, our people are stronger: they are better resourced, better motivated and incentivised than when we exited the last recessions in the early 1990s and 2000s. The Company is also more profitable, more liquid and better structured. In the most recent economic cycle, Headline PBIT margins (the term defined on page 28) peaked at 15.0% (pre-TNS) and bottomed at 11.7%, as opposed to 10.5% and 5.6% in the early 1990s.

• Second, in the medium term, to build upon the successful base we have established whilst integrating our most recent acquisitions effectively. At TNS the integration has gone well, particularly from a margin and operating profit point of view, and the focus has now to be on revenue and gross profit growth, capturing greater market share – an opportunity heightened by the recent lpsos/Synovate takeover.

• Our third priority, in the long-term or over the next five to 10 years, is to: increase the combined geographic share of revenues from the faster-growing markets of Asia Pacific, Latin America, Africa and the Middle East, and Central and Eastern Europe, from over 29% to 35-40%; increase the share of revenues of new media from 30% to 35-40%; and increase the share of more measurable marketing services – such as Consumer Insight and direct, digital and interactive – to be more than 50% of revenues, with a focus on digital and consumer insight, data analytics and the application of new technology.

Sustainability

Paul Richardson is the Board director responsible for sustainability and chairs WPP’s Sustainability Committee, established in 2003. WPP’s five most significant issues are:

• The impact of our work for clients. Our goal is for WPP to be a centre of excellence for sustainability communication, giving our clients the best advice and enhancing consumers’ understanding of sustainability issues. The value of client business supported by our sustainability credentials is worth at least $1 billion.

• Marketing standards, including ethical decision-making, privacy and data protection, and compliance with marketing standards and our Code of Conduct.

• Employment practices, including diversity and inclusion, training and development. Women currently account for 54% of our total employees and 31% of our Board members and executive leaders. In 2011, WPP invested £58.3 million on training and wellbeing.

• Environmental performance. WPP was ranked 41 inNewsweek’s Green Rankings of the 500 largest global companies. We have reduced our carbon footprint per person by 26% since 2006. Our target is a 63% reduction by 2020.

• Social investment including pro bono work. Our total social investment was worth £15.3 million in 2011, the equivalent of 1.5% of reported profit before tax.

Clients

The Group services 344 of the Fortune Global 500, all 30 of the Dow Jones 30, 63 of the NASDAQ 100, 33 of the Fortune e-50. More than 730 national or multinational clients are served in three or more disciplines. More than 470 clients are served in four disciplines, and these clients account for over 57% of Group revenues. This reflects the increasing opportunities for co-ordination and co-operation or ‘horizontality’ between activities, both nationally and internationally and at a client and country level. The Group also works with almost 360 clients across six or more countries.

The Company’s 10 largest clients in 2011, measured by revenues and in alphabetical order, were, British American Tobacco p.l.c., Colgate Palmolive, Dell Inc., Ford Motor Company, Johnson & Johnson, Microsoft

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Corporation, Nestlé S.A., The Procter & Gamble Company, Unilever PLC and Volkswagen. Together, these clients accounted for approximately 17% of the Company’s revenues in 2011. No client of the Company represented more than 5% of the Company’s aggregate revenues in 2011. The Group’s companies have maintained long-standing relationships with many of its clients, with an average length of relationship for the top 10 clients of approximately 50 years.

Government Regulation

From time to time, governments, government agencies and industry self-regulatory bodies in the United States, European Union and other countries in which the Company operates have adopted statutes, regulations, and rulings which directly or indirectly affect the form, content, and scheduling of advertising, public relations and public affairs, and market research, or otherwise limit the scope of the activities of the Company and its clients. Some of the foregoing relate to privacy and data protection and general considerations such as truthfulness, substantiation and interpretation of claims made, comparative advertising, relative responsibilities of clients and advertising, public relations and public affairs firms, and registration of public relations and public affairs firms’ representation of foreign governments.

In addition, there is an increasing trend towards expansion of specific rules, prohibitions, media restrictions, labeling disclosures and warning requirements with respect to advertising for certain products, such as over-the-counter drugs and pharmaceuticals, cigarettes, food and certain alcoholic beverages, and to certain groups, such as children. Proposals have been made for the adoption of additional laws and regulations that could further restrict the activities of advertising, public relations and public affairs, and market research firms and their clients. Though the Company does not expect any existing or proposed regulations to materially adversely impact the Company’s business, the Company is unable to estimate the effect on its future operations of the application of existing statutes or regulations or the extent or nature of future regulatory action.

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C. Organizational Structure

The Company’s business comprises the provision of communications services on a national, multinational and global basis. It operates out of over 2,500 offices in 107 countries including associates. For a list of the Company’s principal subsidiary undertakings and their jurisdictions of incorporation see note 29 to the Consolidated Financial Statements.

The Company organises its businesses in the following segments: Advertising and Media Investment Management; Consumer Insight; Public Relations & Public Affairs; and Branding & Identity, Healthcare & Specialist Communications. These business segments are comprised of the following principal disciplines: Advertising; Media Investment Management; Consumer Insight; Branding & Identity; Healthcare Communications; Direct, Digital, Promotion & Relationship Marketing; Specialist Communications; WPP Digital; WPP Digital partner companies; and WPP knowledge community. A listing of the Group brands operating within these disciplines as at April 2012 is set forth below.

Advertising ADK¹ bates CHI & Partners¹ Dentsu Y&R^{1, 2, 4} Grey HS Ad¹ JWT Ogilvy & Mather Advertising Santo Scangroup¹ Scholz & Friends Soho Square TAXI⁴ Team Detroit The Jupiter Drawing Room & Partners¹ United Network Y&R⁴   Media Investment Management GroupM: Maxus MediaCom MEC Mindshare Outrider Catalyst Xaxis Other media agencies KR Media tenthavenue: Joule Kinetic Worldwide Quisma Spafax   Consumer Insight Kantar: Added Value Center Partners IMRB International Kantar Health Kantar Japan Kantar Media Kantar Operations Kantar Retail Kantar Worldpanel Lightspeed Research Millward Brown Consumer Insight (continued) The Futures Company TNS Other marketing consultancies ohal   Public Relations & Public Affairs Blanc & Otus⁸ Buchanan Communications Burson-Marsteller⁴ Chime Communications PLC¹ Clarion Communications Cohn & Wolfe⁴ Dewey Square Group Glover Park Group Hering Schuppener Hill+Knowlton Strategies Ogilvy Government Relations Ogilvy Public Relations PBN Hill+Knowlton Strategies Penn Schoen Berland⁴ Prime Policy Group Quinn Gillespie RLM Finsbury Wexler & Walker Public Policy Associates⁷   Branding & Identity Addison⁶ BDG architecture + design Coley Porter Bell Dovetail FITCH⁶ Lambie-Nairn⁶ Landor Associates^{4, 6} PeclersParis⁶ The Brand Union⁶ The Partners⁶ VBAT⁶   Healthcare Communications Feinstein Kean Healthcare⁸ GCI Health ghg Ogilvy CommonHealth Worldwide Sudler & Hennessey⁴

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Direct, Digital, Promotion & Relationship Marketing A. Eicoff & Co Actis Systems⁵ AGENDA⁵ Aqua⁵ Barrows¹ Blast Radius⁵ Brierley & Partners¹ Designkitchen⁵ Dialogue Digit EWA FullSIX³ Grass Roots¹ G2 - G2 Branding & Design - G2 Interactive - G2 Direct & Digital - G2 Promotional Marketing Headcount Worldwide Field Marketing High Co¹ Iconmobile⁴ Kassius⁵ KBM Group⁵ Mando Maxx Marketing OgilvyAction OgilvyOne Worldwide OOT² RTCRM⁴ Smollan Group¹ Studiocom⁴ These Days⁵ Vice Media³ VML⁴ Wunderman⁴   Specialist Communications Corporate/B2B     Ogilvy Primary Contact Custom media     Forward Demographic marketing     Bravo⁴     Kang & Lee⁴     MosaicaMD     UniWorld¹     Wing⁴ Employer branding/recruitment     JWT Inside Event/face-to-face marketing     MJM     Metro Foodservice marketing     The Food Group Specialist Communications (continued) Sports marketing     9ine Sports & Entertainment     JMI³     PRISM Group Entertainment marketing     Alliance Youth marketing     The Geppetto Group Real estate marketing     Pace Technology marketing     Banner Corporation⁴ Media & production services     The Farm Group     Hogarth Worldwide     Imagina³     MRC³     United Visions     The Weinstein Company³   WPP Digital 24/7 Media Blue State Digital Deliver Fabric Worldwide¹ F. biz Johannes Leonardo¹ Possible Worldwide Rockfish Interactive Syzygy¹ The Media Innovation Group ZAAZ   WPP Digital partner companies Ace Metrix³ Buddy Media³ eCommera³ HDT Holdings Technology³ In Game Ad Interactive³ Invidi³ Jumptap³ Moment Systems³ nPario¹ Proclivity Systems³ Say Media³ Visible Technologies¹ Visible World³ WildTangent³   WPP knowledge community The Store     Notes ¹    Associate ²    Joint venture ³     Investment ⁴    A Young & Rubicam Group company ⁵    Part of the Wunderman network ⁶    A member of B to D Group ⁷    A Hill+Knowlton Strategies company ⁸    An Ogilvy company

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D. Property, Plant and Equipment

The majority of the Company’s properties are leased, although certain properties which are used mainly for office space are owned. In the United States owned properties include the 370,000 net square foot Young & Rubicam headquarters office building located at 285 Madison Avenue in New York, New York and the 152,000 square foot TNS property located near Toledo, Ohio. Other owned properties are in Latin America (principally in Argentina, Brazil, Chile, Mexico, Peru and Puerto Rico), Asia (India and China) and in Europe (Spain, France, UK and Italy). In Europe owned properties include the 135,626 square foot TNS office located at 2 Rue Francis Pedron, Chambourcy, Paris, France and the 101,592 square foot TNS House at Westgate, Hangar Lane, London. Manufacturing facilities are owned in the United Kingdom. Principal leased properties, which are accounted for as operating leases, include office space at the following locations:

Location	Use	Approximate square footage
636 Eleventh Avenue, New York, NY	Ogilvy & Mather	554,800
498 Seventh Avenue, New York, NY	GroupM, Mindshare, Maxus, Mediacom	358,000
200 Fifth Avenue, New York, NY	Grey Global Group, Cohn & Wolfe	343,000
500/550 Town Center Drive, Dearborn, MI	Team Detroit, JWT, Ogilvy & Mather, Y&R Advertising, PRISM, Burrows, ZAAZ	282,900
466 Lexington Avenue, New York, NY	JWT	270,300
230 Park Avenue South, New York, NY	Burson-Marsteller, Landor, Sudler & Hennessey	270,000

The Company considers its properties, owned or leased, to be in good condition and generally suitable and adequate for the purposes for which they are used. At 31 December 2011, the fixed asset value (cost less depreciation) representing land, freehold buildings and leasehold buildings as reflected in the Company’s consolidated financial statements was approximately £426.8 million.

In 2011 the Company was able to reduce the core property portfolio. Although square footage rose by 1.7% from 22.8 million sq ft to 23.2 million sq ft at the end of the year, this increase was less than the 3.1% of revenue growth attributable to acquisitions and considerably less than constant currency revenue growth of 8.4%, meaning the Company’s core portfolio (excluding the impact of acquisitions) reduced. Consequently average square foot per head dropped to 211 sq ft, well ahead of the Company’s target of 220 sq ft.

As a result of this improvement in space utilisation the establishment cost-to-revenue ratio dropped to 6.7%, ahead of the Company’s long term 7% run rate and in spite of a 3% increase in cost per square foot. For 2012 the Company will continue to focus on the key drivers of space per head, particularly in the US where it runs above the Company’s average, and the cost per square foot on lease renewals, particularly in the faster-growing markets where the rental markets are rising fastest. The Company’s aim is to maintain the establishment cost-to-revenue ratio at 7% or even reduce it.

See note 3 to the Consolidated Financial Statements for a schedule by years of future minimum rental payments to be made and future sublease rental payments to be received, as at 31 December 2011, under non-cancelable operating leases of the Company.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Introduction

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

A. Operating Results

Overview

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

• Advertising and Media Investment Management;

• Consumer Insight;

• Public Relations & Public Affairs; and

• Branding & Identity, Healthcare and Specialist Communications.

In 2011, approximately 41% of the Company’s consolidated revenues were derived from Advertising and Media Investment Management, with the remaining 59% of its revenues being derived from the remaining three segments.

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

1. First, to continue to raise operating margins to the levels of the best-performing competition. In 2011, we achieved headline PBIT margin of 14.3%, equal to our historic pro-forma high. We continue to believe a headline PBIT margin of 18.3% is a tough, but realistic objective given that our best-performing companies in each services sector have already demonstrated they can perform at a combined Group margin of 17%. It may well be that headline PBIT margin on gross profit is a more accurate competitive comparison and we achieved 15.5% in 2011, significantly up on 2010 and at the top levels of industry performance.

2. Second, to continue to increase flexibility in the cost structure. In 2011, flexible staff costs (including incentives, freelance and consultants) were maintained at close to historic highs of around 7% of revenues and continue to position the Group extremely well, if current market conditions change.

3. Third, to improve total share owner return by maximising the return on investment on the Company’s substantial free cash flow across the alternative uses of funds: capital expenditure; mergers and acquisitions; and dividends or share buy-backs.

4. Fourth, we will continue to enhance the value added by the parent company and build unique integrated marketing approaches for clients. WPP is not just a holding company focused on planning, budgeting, reporting and financial issues, but a parent company that can add value to our clients and our people in the areas of human resources, property, procurement, information technology and practice development including sustainability. This does not mean that we seek to diminish the strength of our operating brands, but rather to learn from one another. Our objective is to maximise the added value for our clients in their businesses and our people in their careers.

5. Fifth, to continue to place greater emphasis on revenue growth through our practice development activities, aimed at helping us position our portfolio in the faster-growing functional and geographic areas.

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6. Sixth, to improve still further the quality of creative work throughout the Group by stepping up our training and development programs; by recruiting the finest external talent; by celebrating and rewarding outstanding creative success tangibly and intangibly; by acquiring strong creative companies; and by encouraging, monitoring and promoting our companies’ achievements in winning creative awards.

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

2011, the Company’s twenty-sixth year, was a record year in almost all respects. Revenue, profit before tax and earnings per share all reached new highs. Yet, as pleasing as these financial results are, perhaps the Company’s most satisfying achievement in 2011 was the first ever award of a Cannes Lion to a Holding Company, in recognition of the Company’s collective creative excellence. 2011 demonstrated once again that outstanding creativity and financial success go hand in hand.

This record performance was achieved in difficult circumstances, particularly in the second half of the year, when the Eurozone crisis triggered uncertainty amongst consumers and corporates across the globe, resulting in a slowdown of economic activity in most geographic regions and functional sectors. Total share owner return was enhanced by a 38% increase in dividends to 24.6p, a record level, and included a 45% increase in the second interim dividend to 17.14p, moving more rapidly towards the Company’s new dividend payment ratio target of 40%.

Billings were up almost 5% to £44.8 billion. Revenues were up over 7% to £10.0 billion, the first time the Group has exceeded £10 billion. Revenues exceeded all of the Company’s competitors for the fourth consecutive year and by an increasing amount.

Reported profit before interest and tax rose over 22% to £1.258 billion from £1.028 billion. Headline PBIT was up over 16% to £1.429 billion against £1.229 billion in 2010. Headline PBIT margin was 14.3% in 2011 against 13.2% last year, well ahead of target and equal to the pro-forma high pre-Lehman. The headline PBIT margin on gross profit was 15.5%, up 1.1 margin points on 2010.

Headline EBITDA increased by 14% to £1.640 billion. Headline PBT was up almost 19% to £1.229 billion and reported profit before tax was up over 18% to £1.008 billion, above £1 billion for the first time. Diluted earnings per share were up over 40% to 64.5p.

Free cash flow strengthened to £1.013 billion in the year, over £1 billion for the first time. Net debt averaged £2.8 billion in 2011, down £0.2 billion at 2011 exchange rates, and net debt at 31 December 2011 was £2.5 billion, £0.6 billion higher than 2010, reflecting stronger acquisition and share buy-back activity in the latter half of the year.

Estimated net new business billings of £3.2 billion ($5.2 billion) were won in 2011, up over 7% on 2010.

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Segment performance

Performance of the Group’s businesses is reviewed by management based on headline PBIT. A table showing these amounts by sector and geographical area for each of the three years ended 31 December 2011, 2010 and 2009 is presented in note 2 to the Consolidated Financial Statements. To supplement the reportable currency segment information presented in note 2 to the Consolidated Financial Statements, the tables below give details of revenue growth by geographical area and sector on a reported, constant currency, and like-for-like basis.

Geographical area

	Reported revenue growth %+/(-)					Constant currency revenue growth %+/(-)				Like-for-like revenue growth %+/(-)
	2011		2010			2011		2010		2011		2010
North America		2.7		9.6			6.3		7.7		2.9		7.6
United Kingdom		8.8		5.7			8.8		5.7		6.7		5.9
Western Continental Europe1		7.7		(0.1	)		6.3		2.7		2.2		1.9
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		12.5		13.0			12.6		5.6		10.5		5.6
Total Group		7.4		7.4			8.4		5.6		5.3		5.3
1   Western Continental Europe includes Ireland.

North America continued to show good growth throughout the year, with constant currency revenues up 6.3%. The UK, against market trends, showed even stronger growth, with constant currency revenues up almost 9% and gross profit even stronger up almost 11%, accelerating in the second half. Western Continental Europe, although relatively more difficult, grew constant currency revenues by over 6%, partially reflecting acquisition activity. Austria, Germany, Switzerland and Turkey all showed strong like-for-like growth for the year, but France and especially Greece, Portugal and Spain remained affected by the Eurozone debt crisis.

In Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe, revenue growth was strongest, up well over 12%, principally driven by Latin America and the BRICs¹ and Next 11² parts of Asia Pacific and the CIVETS³ and the MIST⁴. Like-for-like growth was up well over 10%. Latin America showed the strongest growth of all of our sub-regions in the year, with constant currency revenues up over 14% and up over 18% like-for-like. The Middle East remained the most challenged sub-region. In Central and Eastern Europe, constant currency revenues were up over 6% and up almost 6% like-for-like, with strong growth in Russia, Ukraine, Kazakhstan, Poland and Romania, but Hungary and the Czech Republic were more challenging. Growth in the BRICs, which account for almost $2 billion of revenue, was over 17%, on a like-for-like basis, with Next 11 and CIVETS up 13% and well over 9% respectively on the same basis. The MIST was up almost 14%.

In 2011, over 29% of the Group’s revenues came from Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe – over one percentage point more compared with the previous year and against the Group’s strategic objective of 35-40% over the next three to four years. Markets outside North America now account for over 66% of our revenues, up from 62% five years ago.

¹  Brazil, Russia, India and China

²  Bangladesh, Egypt, Indonesia, Mexico, Nigeria, Pakistan, the Philippines, South Korea, Turkey and Vietnam (the Group has no operations in Iran)

³  Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa

⁴  Mexico, Indonesia, South Korea and Turkey

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Sector

	Reported revenue growth %+/(-)				Constant currency revenue growth %+/(-)				Like-for-like revenue growth %+/(-)
	2011		2010		2011		2010		2011		2010
Advertising and Media Investment Management		11.4		9.1		12.2		7.0		7.4		7.1
Consumer Insight		1.1		5.8		1.7		4.4		0.8		3.9
Public Relations & Public Affairs		4.8		6.1		6.2		4.3		4.6		3.7
Branding & Identity, Healthcare and Specialist Communications		8.5		7.0		10.1		5.0		6.9		4.5
Total Group		7.4		7.4		8.4		5.6		5.3		5.3

In constant currencies, Advertising and Media Investment Management revenues grew by 12.2%, with like-for-like growth of 7.4%. Of the Group’s advertising networks, Ogilvy & Mather, Grey and United finished the year strongly, with particularly strong growth in the UK, Latin America and Africa.

Growth in the Group’s Media Investment Management businesses was very consistent throughout the year, with constant currency revenues up almost 19% for the year and like-for-like growth up almost 13%. tenthavenue, the ‘engagement’ network focused on out-of-home media, was established towards the end of 2010 and in 2011 showed strong revenue growth, with like-for-like revenues up over 14%. The strong revenue growth across most of the Group’s businesses, together with good cost control, resulted in the combined headline PBIT margin of this sector improving by 0.8 margin points to 16.1%.

In 2011, Ogilvy & Mather Advertising, JWT, Y&R, Grey and United generated estimated net new billings of £909 million ($1.455 billion). GroupM (the Group’s Media Investment Management arm, which includes Mindshare, MEC, MediaCom, Maxus, GroupM Search and Xaxis) together with tenthavenue, generated net new business billings of £1.587 billion ($2.539 billion).

Consumer Insight revenues grew 1.7% on a constant currency basis, with gross profit up 2.2% on the same basis. On a like-for-like basis revenues were up 0.8% with gross profit growth stronger at 1.9% on the same basis. Headline PBIT margins improved 0.8 margin points to 10.5%, while headline PBIT margin on gross profit improved 1.1 margin points to 14.3% – reflecting the benefit of continued cost focus. As a result, headline PBIT was up over 10% to £259 million.

The Group’s Public Relations & Public Affairs businesses had another good year with full-year growth in constant currencies of 6.2%, with like-for-like revenues up 4.6%. Headline PBIT margins rose by 0.3 margin points to 16.1%.

At the Group’s Branding & Identity, Healthcare and Specialist Communications businesses (including direct, digital and interactive), constant currency revenues grew strongly at 10.1% with like-for-like growth of 6.9%. Like-for-like revenue growth slipped slightly in quarter four but remained above 6%. The Group’s global direct, digital and interactive agencies showed continuing strong growth, with like-for-like revenues up well over 7% for the year. This sector showed strong margin improvement, with headline PBIT margins up 1.9 margin points to 14.3%. Over 30% of the Group’s 2011 revenues came from direct, digital and interactive, up over one percentage point from the previous year.

Marketing services comprised almost 60% of our revenues in 2011, a similar proportion to 2010. We are no longer an advertising agency, we really are a communications services company.

19

2011 compared with 2010

Revenues

Reported revenues were up 7.4% in 2011 to £10,021.8 million from £9,331.0 million in 2010. The Group’s reported revenue growth for the year of over 7% reflected the strength of sterling, primarily against the US dollar. On a constant currency basis, which excludes the impact of currency movements, revenues were up over 8%. On a like-for-like basis, excluding the impact of acquisitions and currency, revenues were up 5.3%, with gross profit up 5.9%. In the fourth quarter, like-for-like revenues were up 4.5%, down slightly on the third quarter, primarily due to stronger comparatives.

Despite the slowdown in economic activity resulting from the uncertainty triggered by the Eurozone crisis, advertising and marketing services expenditures continued to rise and there seem to have been some significant changes, particularly in corporate behaviour, to explain why. In 2009, post-Lehman, all bets were off. Consumers and corporates were focused almost totally on rapidly reducing costs and de-leveraging. In 2010 and 2011, however, the situation seemed to change. The financial world did not come to an end as some had predicted. Western-based multinational companies, which today are reputed to be sitting on as much as $2 trillion net cash with relatively un-leveraged balance sheets, were still fearful of making mistakes but prepared to invest in capacity and behind brands in fast-growing markets. At the same time, they were also prepared to invest in brands to maintain or increase market share even in slow-growth Western markets, such as the US and Western Europe. This approach has the virtue of not increasing fixed costs, although we in the communications services business naturally regard brand spending as a fixed investment and not a discretionary cost.

On a combined basis, over the last two years, there has been a sequential improvement in like-for-like quarterly revenue growth, with 6.7% for the first quarter, 10.3% in the second, 12.2% for the third and 13.1% for the fourth. This two-year combined sequential quarterly growth continues to reflect increased client advertising and promotional spending – with the former tending to grow faster than the latter, which from our point of view is more positive – across most of the Group’s major geographic markets and functional sectors despite tougher comparatives. Nonetheless, clients understandably continue to demand increased effectiveness and efficiency, i.e. better value for money.

Operating costs

Operating costs increased by 6.0% in 2011 to £8,046.3 million from £7,587.5 million in 2010 on a reported basis and by 7.1% on a constant currency basis. During 2011, the Group continued to reap the benefits of containing operating costs, with improvements across most cost categories, particularly direct, property, commercial and office costs.

On a like-for-like basis the average number of people in the Group increased by 4.6% in 2011. On the same basis, the number of people in the Group at 31 December 2011 was 4.3% higher than at the end of 2010. Also on a like-for-like basis, revenues increased by 5.3% and gross profit 5.9%.

Reported staff costs, excluding incentives, rose by 8.6% and by 9.6% in constant currency. Incentive payments amounted to £338 million (or over $500 million) which was almost 20% of headline PBIT before incentives and income from associates and represented close to maximum achievement of agreed performance targets. The Group’s reported staff cost to revenue ratio, including incentives, increased by 0.3 margin points to 58.6% compared with 58.3% in 2010. Following intentional containment in 2009 and 2010 post-Lehman, the Group continued to increase its investment in human capital in 2011, particularly in the faster-growing geographic and functional markets as like-for-like revenues and gross profit increased significantly. However, the Group’s more representative staff costs to gross profit ratio remained flat at 63.6% compared with the prior year, as gross profit grew faster than revenues.

20

In 2011, the ratio of variable staff costs (incentives, freelance and consultants costs) to total staff costs was 12.2%, compared with 13.4% in 2010. As a proportion of revenue, variable staff costs were 7.2% in 2011 compared with 7.8% in 2010.

In 2011 we were able to reduce our core property portfolio. Although square footage rose by 1.7% from 22.8 million sq ft to 23.2 million sq ft at the end of the year, this increase was less than the 3.1% of revenue growth attributable to acquisitions and considerably less than constant currency revenue growth of 8.4%, meaning our core portfolio (excluding the impact of acquisitions) reduced. As a result of this improvement in space utilisation the establishment cost-to-revenue ratio in 2011 dropped to 6.7% (in spite of a 3% increase in cost per square foot) from 7.1% in 2010.

Operating profit

As a result of the above, reported PBIT rose over 22% to £1.258 billion from £1.028 billion, up over 23% in constant currencies. Headline PBIT rose over 16% to £1.429 billion from £1.229 billion, up over 17% in constant currencies.

Finance income, finance costs and revaluation of financial instruments

Finance income increased to £97.3 million in 2011 from £81.7 million in 2010. Finance costs increased to £297.2 million in 2011 from £276.8 million in 2010. Therefore, net finance costs were £199.9 million, up from £195.1 million last year, reflecting lower average net debt, offset by higher funding costs. Revaluation of financial instruments resulted in a charge of £50.0 million in 2011 and income of £18.2 million in 2010. The 2011 charge is predominantly attributable to revaluation of put options over non-controlling interests.

Taxes

The Company’s effective tax rate on reported profit before tax in 2011 was 9.1%, compared to 22.4% in 2010. The difference was primarily due to the release of prior year corporate tax provisions following the resolution of a number of open tax matters, together with deferred tax credits in relation to amortisation of acquired intangible assets.

Profit for the year

Profit for the year increased by 38.7% to £916.5 million in 2011 from £661.0 million in 2010 on a reported basis and increased by 40.2% in constant currency, reflecting higher profit margins and a lower effective tax rate. In 2011, £840.1 million of profit for the year was attributable to equity holders of the parent and £76.4 million attributable to non-controlling interests.

2010 compared with 2009

Revenues

Reported revenues were up 7.4% in 2010 to £9,331.0 million from £8,684.3 million in 2009. Our reported revenue growth for the year of 7.4% reflected the comparative weakness of sterling against most currencies, other than the euro. On a constant currency basis, which excludes the impact of currency movements, revenues were up 5.6%. On a like-for-like basis, excluding the impact of acquisitions and currency, revenues were up 5.3%, reflecting sequential quarterly improvement throughout the year. Revenue grew by 8.5% in the final quarter, the fastest rate of like-for-like quarterly growth since the fourth quarter of 2000. The month of December saw the first monthly double-digit growth rate since January 2001.

Throughout 2010 we have seen continued sequential improvement in our like-for-like quarterly revenue growth, with the final two quarters of the year at 7.5% and 8.5% respectively. This followed zero like-for-like growth in the first quarter and 4.7% in quarter two.

This significant turnaround was directionally in line with our earlier forecasts (we anticipated like-for-like growth in the second quarter of 2010 as early as the third quarter trading update of 2009), but was considerably

21

more violent than anticipated. In 2009, our budgets were optimistic anticipating like-for-like growth of -2%. In fact we came in at -8%. In 2010, on the other hand, we proved too pessimistic, budgeting like-for-like growth of zero and coming in at over 5%.

Operating costs

Reported operating costs increased by 5.1%. Reported staff costs, excluding incentives, were up 3.2%. Incentive payments (including the cost of share-based compensation) increased 92.1% to £342 million from £178 million. On a reported basis, despite the almost doubling of incentive payments, the Group’s staff cost-to-revenue ratio fell to 58.3% compared with 58.9% in 2009.

Together with the improved top-line growth, the Group has benefited from the cost actions taken, particularly towards the end of 2009, to adjust headcount and staff costs. On a like-for-like basis, average headcount has fallen by over 4%, compared with 2009, although given the substantial increase in like-for-like revenues of 8.0% in the second half of the year, our operating companies have begun to invest in more talent.

Revenue conversion post-incentives, that is incremental profit as a proportion of incremental revenue, was very strong at 33%, as our operating companies benefited from the actions to reduce both staff costs and other operating costs in 2009 and during 2010.

Part of the Group’s strategy is to continue to ensure that variable staff costs (incentives, freelance and consultants costs) are a significant proportion of total staff costs and revenue, as this provides flexibility to deal with volatility in revenues and recessions or slow-downs. In 2010, the ratio of variable staff costs to total staff costs increased significantly to 13.4%, compared with 9.7% in 2009. As a proportion of revenue, variable staff costs were 7.8% in 2010 compared with 5.7% in 2009. These represent the highest ratios in the last 10 years. The business is, therefore, even better protected against economic downturns.

Operating profit

Reported PBIT rose over 25% to £1.028 billion in 2010 from £819 million in 2009 as a result of the above and reflecting a lower charge for goodwill impairment and amortisation of intangibles, partly offset by higher investment write-downs.

Finance income, finance costs and revaluation of financial instruments

Finance income decreased to £81.7 million in 2010 from £150.4 million in 2009. Finance costs decreased to £276.8 million in 2010 from £355.4 million in 2009. Therefore, net finance costs were £195.1 million, down from £205.0 million last year, reflecting lower debt, partly offset by higher funding costs. Revaluation of financial instruments resulted in £18.2 million of income in 2010 and £48.9 million in 2009. The 2010 income is attributable to gains from movements in the fair value of treasury instruments.

Taxes

The Company’s effective tax rate on reported profit before tax in 2010 was 22.4%, a reduction of 1.1 percentage points from 2009, as a result of utilisation and recognition of losses and other temporary differences not previously recognised.

Profit for the year

Profit for the year increased by 30.4% to £661.0 million in 2010 from £506.9 million in 2009 on a reported basis and increased by 23.7% in constant currency, reflecting higher profit margins and lower effective tax rate. In 2010, £586.0 million of profit for the year was attributable to equity holders of the parent and £75.0 million attributable to non-controlling interests.

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Inflation

As in 2010, in management’s opinion inflation did not have a material impact on the Company’s results for the year or financial position at 31 December 2011.

Foreign currency fluctuations

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

B. Liquidity and Capital Resources

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

The Company spent £633.8 million (excluding cash and cash equivalents acquired) and £295.9 million for acquisitions and investments in 2011 and 2010, respectively, including payments on loan note redemptions and earnout consideration resulting from acquisitions in prior years. For the same periods, cash spent on purchases of property, plant and equipment and other intangible assets was £253.2 million and £217.5 million, respectively, cash spent on share repurchases and buy-backs was £182.2 million and £46.4 million, respectively, and dividends paid were £218.4 million and £200.4 million, respectively.

There are broadly three alternative uses of funds.

• Capital expenditure, which usually approximates the depreciation cost. Pressure here has eased as technology pricing has fallen, although we have increased investment in our digital and technology-based service offering, in line with our strategic goals. We have also invested significantly more in real estate following lease renewals to secure greater efficiencies.

• Mergers and acquisitions, which have historically taken the lion’s share of free cash flow. Here the Group has raised the hurdle rate on capital employed so that return on capital may be increased. There is a very significant pipeline of reasonably priced small and medium sized potential acquisitions, with the exception of Brazil and India and digital in the US, where prices seem to have got ahead of themselves because of pressure on our competitors to catch up. This is clearly reflected in some of the operational and governance issues that are starting to surface elsewhere at our competitors, particularly in fast growing markets like China.

The Group’s acquisition focus in 2011 was again on the triple opportunities of faster-growing geographic markets, new media and consumer insight, including data analytics and the application of technology, totally consistent with the Group’s strategic priorities in the areas of geography, new communication services and measurability. In 2011, the Group spent £381 million on initial acquisition payments, net of cash acquired and disposal proceeds. Net acquisition spend is currently targeted at around £300 million per annum and the Group will continue to seize opportunities in line with its strategy.

• Dividends or share buy-backs. The Group has increasingly come to the view, based on co-operative research with leading investment institutions, that, currently, the markets favour consistent increases in dividends and higher maintainable pay-out ratios, along with anti-dilutive buy-backs and, of course, sensibly-priced strategic acquisitions. Following the strong first half results in 2011, the Board raised the dividend by 25%, a pay-out ratio in the first half of 33%. The second interim dividend has been increased by 45%, bringing the total dividend for the year to 24.60p per share, up 38%. As indicated in the Annual General Meeting (AGM) statement in June 2011, the Board’s objective remains to increase the dividend pay-out ratio to approximately 40% as soon as possible compared to the 2010 ratio of 31%.

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Dividends to be paid in respect of 2011 will total over £300 million for the year. Share buy-backs will continue to be targeted to absorb any share dilution from scrip dividends, issues of options or restricted stock, although the Company does also have considerable free cash flow to take advantage of any anomalies in market values, as it did last year. Share buy-backs in 2011 cost £182 million, representing 2.1% of issued share capital.

The Group’s liquidity is affected primarily by the working capital flows associated with its media buying activities on behalf of clients. The working capital movements relate primarily to the Group’s billings. Billings comprise the gross amounts billed to clients in respect of commission-based/fee-based income together with the total of other fees earned. In 2011, billings were £44.8 billion, or 4.5 times the revenue of the Group. The inflows and outflows associated with media buying activity therefore represent significant cash flow within each month of the year and are forecast and re-forecast on a regular basis throughout the year by the Group’s treasury staff so as to ensure that there is continuing coverage of peak requirements through committed borrowing facilities from the Group’s bankers and other sources.

Liquidity risk management—The Group manages liquidity risk by ensuring continuity and flexibility of funding even in difficult market conditions. Undrawn committed borrowing facilities are maintained in excess of peak net borrowing levels and debt maturities are closely monitored. Targets for debt and cash position are set on an annual basis and, to assist in meeting this, working capital targets are set for all the Group’s major operations. See additional discussion on liquidity risk in note 24 to the consolidated financial statements.

Debt

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

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

Hedging of financial instruments—The Group’s policy on interest rate and foreign exchange rate management sets out the instruments and methods available to hedge interest and currency risk exposures and the control procedures in place to ensure effectiveness. The Group uses derivative financial instruments to reduce exposure to foreign exchange risk and interest rate movements. The Group does not hold or issue derivative financial instruments for speculative purposes.

In 2011, net cash inflow from operating activities was £665.2 million. Free cash flow available for debt repayment, acquisitions, share buy-backs and dividends was £1,012.7 million. This free cash flow was partially absorbed by £532.4 million in net acquisitions and disposals, by £182.2 million in share repurchases and buy-backs and by £218.4 million in dividends, leaving £79.7 million.

At 31 December 2011, the Group’s net debt was £2.5 billion, up £0.6 billion from £1.9 billion in 2010, reflecting stronger acquisition and share buy-back activity in the latter half of the year. Net debt averaged £2.8 billion in 2011, down £0.2 billion at 2011 exchange rates. The Group’s average net debt, which was around 1.7 times headline EBITDA in 2011 compared with 2.1 times in 2010, and well within the Group’s current target range of 1.5-2.0 times. Interest (finance cost net of finance income, excluding revaluation of financial instruments) cover based on headline PBIT in 2011 was 7.1 times. So far, in the first three months of 2012, average net debt was up approximately £0.4 billion at £2.6 billion against £2.2 billion for the same period in 2011, at 2012 exchange rates.

With a current equity market capitalisation of approximately £10.8 billion, the total enterprise value of the Company is approximately £13.6 billion, a multiple of 8.3 times 2011 headline EBITDA.

24

The Company’s borrowings are evenly distributed between fixed and floating rate debt. Given the strong cash generation of the business, its debt maturity profile and available facilities, the directors believe the Company has sufficient liquidity to match its requirements for the foreseeable future.

Refer to Item 5F for details on the Company’s material commitments for capital expenditures at 31 December 2011.

C. Research and Development, Patents and Licenses

Not applicable.

D. Trend Information

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

In the first quarter of 2012, reported revenues were up 7.6% at £2.392 billion. Revenues in constant currency were up 7.4%, reflecting the slight weakness of the pound sterling against the US dollar partly offset by its slight strength against the Euro. On a like-for-like basis, excluding the impact of acquisitions and currency fluctuations, revenues were up 4.0%.

The pattern of revenue growth in 2012 has started similarly to the full year of 2011, with continuing improvement across all sectors and geographies. Advertising and Media Investment Management and Branding & Identity, Healthcare and Specialist Communications (including direct, digital and interactive), as in 2011, were the strongest by sector, with Consumer Insight also improving, particularly against the last quarter. Our budgets for 2012 indicated like-for-like growth of around 4% over last year and for the first three months actual performance was in line with those projections. A preliminary look at our quarter one revised forecasts, indicates revenue growth slightly better than budget at over 4% and a slightly better second half. In 2011, the mature markets of the United States and Western Continental Europe slowed, although the United Kingdom, against market trends grew strongly. This pattern has mostly continued into the first quarter of 2012 and as indicated in the budgets for this year, the faster growing markets of Asia Pacific, Latin America, Africa and the Middle East and Central and Eastern Europe were strongest in the first quarter, followed by the United Kingdom and Western Continental Europe.

The Group gained a total of £1.159 billion ($1.855 billion) in net new business wins in the first quarter, compared to £841 million ($1.346 billion) in the same period last year.

Following the Group’s record year in 2011, 2012 has started well with all geographies and sectors growing revenues. Our operating companies are hiring cautiously and responding to any geographic, functional and client changes in revenues – positive or negative.

Concerns about the Eurozone crisis, The Middle East, a Chinese hard-landing and rising commodity prices certainly affected consumer and corporate confidence globally in the second half of 2011 and was reflected in a slowdown in economic activity in most geographic regions and functional sectors. Despite this, advertising and marketing services expenditures continued to rise as Western based multi-national companies and increasingly new-market based companies are prepared to invest in both capacity and behind brands in fast growing markets. At the same time, they are also prepared to invest in brands to maintain or increase market share even amongst slower growth Western markets, such as the United States and Western Europe.

The pattern of 2012 looks very similar to 2010 and 2011. Forecasts of worldwide real GDP growth still hover around 2.5-3.5%, with inflation of 2% giving nominal GDP growth of 4.5-5.5%. Advertising as a proportion of GDP should at least remain constant, although it is still at relatively depressed historical levels, particularly in mature markets, post-Lehman and advertising should grow at least at a similar rate as GDP. The three maxi-quadrennial events of 2012, the UEFA Football Championships in Central and Eastern Europe, the Summer

25

Olympics and Paralympics in London and last, but not least, the US Presidential Elections in November should underpin industry growth by 1% alone this year. Both consumers and corporates are likely to continue to be cautious and risk averse, but should continue to purchase or invest in brands in both fast and slow growth markets. Some worry about Chinese growth rates and hard landings, although we see little let-up in Mainland China (up almost 17% like-for-like in the first quarter) and believe the worst case is a soft landing, following the strategies laid out in the 12th Five-Year Plan, which are good for us, as they focus on consumption, a social security safety net and the service industries.

One of the clouds on the horizon, may, however be 2013. There will be no maxi- or mini- quadrennial events in that year. It now seems more likely that President Obama will be re-elected and will have to confront the intimidating US budget deficit, whilst dealing with a Republican-controlled House of Representatives and/or Senate. 2014 looks a better prospect, however, with the World Cup in Brazil, the Winter Olympics in Sochi and the mid-term Congressional elections in America.

E. Off-Balance Sheet Arrangements

None.

F. Tabular Disclosure of Contractual Obligations

The following summarises the Company’s estimated contractual obligations at 31 December 2011, and the effect such obligations are expected to have on its liquidity and cash flows in the future periods. Certain obligations presented below held by one subsidiary of the Company may be guaranteed by another subsidiary in the ordinary course of business.

			Payments due in
(£m)	Total		2012		2013		2014		2015		2016		Beyond 2016
Debt financing under the Revolving Credit Facility and in relation to unsecured loan notes1
Eurobonds		1,545.9		—		501.4		—		417.8		626.7		—
Sterling and convertible bonds		1,050.0		—		—		450.0		—		—		600.0
US$ bonds		1,148.4		—		—		624.6		—		—		523.8
Other		115.2		19.3		—		16.2		—		79.7		—
Subtotal		3,859.5		19.3		501.4		1,090.8		417.8		706.4		1,123.8
Interest payable		978.7		221.5		220.8		168.5		106.9		80.7		180.3
Total		4,838.2		240.8		722.2		1,259.3		524.7		787.1		1,304.1
Operating leases2		2,335.0		361.4		316.9		278.5		245.0		202.5		930.7
Capital commitments3		127.4		123.9		3.5		—		—		—		—
Investment commitments3		40.0		39.7		0.3		—		—		—		—
Estimated obligations under acquisition earnouts and put option agreements		402.4		176.0		34.2		28.2		72.5		30.3		61.2
Total contractual obligations		7,743.0		941.8		1,077.1		1,566.0		842.2		1,019.9		2,296.0

¹  In addition to debt financing under the Revolving Credit Facility and in relation to unsecured loan notes, the Company had short-term overdrafts at 31 December 2011 of £518.4 million. The Group’s net debt at 31 December 2011 was £2,464.8 million and is analysed in Item 5B.

²  Operating leases are net of sub-let rentals of £40.5 million.

³  Capital and investment commitments include commitments contracted, but not provided for in respect of property, plant and equipment and in respect of interests in associates and other investments, respectively.

The Company expects to make annual contributions to its funded defined benefit plans, as determined in line with local conditions and practices. Contributions in respect of unfunded plans are paid as they fall due. The total contributions (for funded plans) and benefit payments (for unfunded plans) paid for 2011 amounted to £66.8 million (2010: £53.3 million, 2009: £47.7 million). Employer contributions and benefit payments in 2012 are expected to be in the range of £60 million to £80 million depending on the performance of the assets. Projections for years after 2012 are subject to a number of factors, including future asset performance and changes in assumptions which mean the Company is unable to make sufficiently reliable estimations of future contributions.

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NON-GAAP INFORMATION

Constant currency

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

The Group uses US dollar-based, constant currency models to measure performance. These are calculated by applying budgeted 2011 exchange rates to local currency reported results for the current and prior year. This gives a US-dollar denominated income statement and balance sheet which exclude any variances attributable to foreign exchange rate movements.

Pro-forma (‘like-for-like’)

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

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

The following table reconciles reported revenue and gross profit growth for 2011 and 2010 to like-for-like revenue and gross profit growth for the same period.

	Revenue				Gross profit
	£m				£m
2009 Reportable		8,684				7,981
Impact of exchange rate changes		159		1.8%		149		1.9%
Changes in scope of consolidation		26		0.3%		16		0.2%
Like-for-like growth		462		5.3%		415		5.2%
2010 Reportable		9,331		7.4%		8,561		7.3%
Impact of exchange rate changes		(93	)	(1.0%)		(94	)	(1.1%)
Changes in scope of consolidation		289		3.1%		267		3.1%
Like-for-like growth		495		5.3%		505		5.9%
2011 Reportable		10,022		7.4%		9,239		7.9%

Headline PBIT

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

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

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

Headline PBIT margin

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

Headline PBIT margin on gross profit

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

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

Headline PBT

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

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

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

	Year ended 31 December
	2011 £m			2010 £m			2009 £m
Profit before taxation		1,008.4			851.3			662.6
Amortisation and impairment of acquired intangible assets		172.0			170.5			172.6
Goodwill impairment		—			10.0			44.3
Gains on disposal of investments		(0.4	)		(4.1	)		(31.1	)
Gains on re-measurement of equity on acquisition of controlling interest		(31.6	)		(13.7	)		—
Investment write-downs		32.8			37.5			11.1
Share of exceptional (gains)/losses of associates		(2.1	)		0.3			1.6
Revaluation of financial instruments		50.0			(18.2	)		(48.9	)
Headline PBT		1,229.1			1,033.6			812.2

Headline EBITDA

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

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

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

	Year ended 31 December
	2011 £m			2010 £m			2009 £m
Profit for the year		916.5			661.0			506.9
Taxation		91.9			190.3			155.7
Finance income, finance cost and revaluation of financial instruments, net		249.9			176.9			156.1
Amortisation and impairment of acquired intangible assets		172.0			170.5			172.6
Depreciation of property, plant and equipment		185.8			184.9			195.3
Amortisation of other intangible assets		25.7			25.4			30.5
Goodwill impairment		—			10.0			44.3
Gains on disposal of investments		(0.4	)		(4.1	)		(31.1	)
Gains on re-measurement of equity on acquisition of controlling interest		(31.6	)		(13.7	)		—
Investment write-downs		32.8			37.5			11.1
Share of exceptional (gains)/losses of associates		(2.1	)		0.3			1.6
Headline EBITDA		1,640.5			1,439.0			1,243.0

Billings

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

Estimated net new billings

Management uses estimated net new billings to assess the performance of the business.

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

Free cash flow

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

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

	Year ended 31 December
	2011 £m			2010 £m			2009 £m
Net cash inflow from operating activities		665.2			1,361.2			818.8
Share option proceeds		28.8			42.7			4.1
Proceeds on disposal of property, plant and equipment		13.2			7.6			9.2
Movement in working capital and provisions		620.9			(225.5	)		102.1
Purchases of property, plant and equipment		(216.1	)		(190.5	)		(222.9	)
Purchase of other intangible assets (including capitalised computer software)		(37.1	)		(27.0	)		(30.4	)
Dividends paid to non-controlling interests in subsidiary undertakings		(62.2	)		(66.7	)		(63.0	)
Free cash flow		1,012.7			901.8			617.9

Net debt and average net debt

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

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

The following table is an analysis of net debt:

	At 31 December
	2011 £m			2010 £m			2009 £m
Debt financing		(4,411.4	)		(3,853.6	)		(4,307.1	)
Cash and short-term deposits		1,946.6			1,965.2			1,666.7
Net debt		(2,464.8	)		(1,888.4	)		(2,640.4	)

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Use of Estimates

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

Critical Accounting Policies

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

Goodwill and other intangibles

The Company has a significant amount of goodwill and other intangible assets. The Company initially tests the carrying value of goodwill and other indefinite lived intangible assets for impairment annually at 30 June of each year, and then updates the review at 31 December or whenever there is an indication of impairment.

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

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

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

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

• After the projection period, there is an assumed annual long-term growth rate of 3% (2010: 3.0%), with no improvements in operating margins. Management have made the judgement that this long-term growth rate does not exceed the long-term growth rate for the industry; and

• The net present value of the future cash flows was calculated using a pre-tax discount rate of 9.50% (2010: 9.58%).

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Acquisition accounting

The Group accounts for acquisitions in accordance with IFRS 3 (revised) ‘Business Combinations’. IFRS 3 (revised) requires the acquiree’s identifiable assets, liabilities and contingent liabilities (other than non-current assets or disposal groups held for sale) to be recognised at fair value at acquisition date. In assessing fair value at acquisition date, management make their best estimate of the likely outcome where the fair value of an asset or liability may be contingent on a future event. In certain instances, the underlying transaction giving rise to an estimate may not be resolved until some years after the acquisition date. IFRS 3 (revised) requires the release to profit of any acquisition reserves which subsequently become excess in the same way as any excess costs over those provided at acquisition date are charged to profit. At each period end management assess provisions and other balances established in respect of acquisitions for their continued probability of occurrence and amend the relevant value accordingly through the consolidated income statement or as an adjustment to goodwill as appropriate under IFRS 3 (revised). In 2011, operating profit includes credits totaling £14.0 million (2010: £16.5 million, 2009: £19.4 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2010.

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

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

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

Revenue recognition

Advertising and Media Investment Management revenue is typically derived from commissions on media placements and fees for advertising services. Revenue may consist of various arrangements involving commissions, fees, incentive-based revenue or a combination of the three, as agreed upon with each client.

Revenue is recognised when the service is performed, in accordance with the terms of the contractual arrangement. Incentive-based revenue typically comprises both quantitative and qualitative elements; on the element related to quantitative targets, revenue is recognised when the quantitative targets have been achieved; on the element related to qualitative targets, revenue is recognised when the incentive is received or receivable.

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

In applying the proportional performance method of revenue recognition for both market research and other long-term contracts, management is required to make significant judgements, estimates and assumptions. In

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assessing contract performance, both input and output criteria are reviewed. Costs incurred are used as an objective input measure of performance. The primary input of all work performed under these arrangements is labour. As a result of the relationship between labour and cost, there is normally a direct relationship between costs incurred and the proportion of the contract performed to date. Costs incurred as a proportion of expected total costs is used as an initial proportional performance measure. The indicative proportional performance measure is subsequently validated against other more subjective criteria (i.e. relevant output measures) such as the percentage of interviews completed, percentage of reports delivered to a client and the achievement of any project milestones stipulated in the contract. In the event of divergence between the objective and more subjective measures, the more subjective measures takes precedence since these are output measures.

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

Pension costs

Pension costs are assessed in accordance with the advice of local independent qualified actuaries. The latest full actuarial valuations for the various plans were carried out at various dates in the last three years. These valuations have generally been updated by the local independent qualified actuaries to 31 December 2011.

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

The Group’s pension deficit was £280.8 million at 31 December 2011, compared to £239.9 million at 31 December 2010. The increase in the deficit is primarily due to lower discount rates as well as a lower return on pension assets. These factors are partially offset by actions taken by WPP to curtail and settle plans.

There are a number of areas in the pension accounting that involve judgements made by management. These include establishing the long-term expected rates of investment return on pension assets, mortality assumptions, discount rates, inflation, rate of increase in pensions, in payment and salary increases.

Most of the Group’s pension plan assets are held by its plans in the UK and North America. In the UK, the forecasted weighted average return on assets decreased to 4.6% at 31 December 2011 from 5.4% at 31 December 2010, and in North America, the forecasted weighted average return decreased to 5.9% from 6.4%, broadly in line with the yields available in both markets. Management reviews the expected long-term rates of return on an annual basis and revises them as appropriate.

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

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At 31 December 2011, the life expectancies underlying the value of the accrued liabilities for the main defined benefit pension plans operated by the Group were as follows:

Years life expectancy after age 65	All Plans		North America		UK		Western Continental Europe		Other1
Current pensioners – male		20.9		19.7		22.5		20.3		19.3
Current pensioners – female		22.8		21.6		24.0		23.5		24.7
Future pensioners (current age 45) – male		22.4		21.2		23.7		22.7		19.3
Future pensioners (current age 45) – female		24.0		22.5		25.1		25.4		24.7
1    Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

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

For a 0.25% increase or decrease in the discount rate at 31 December 2011, the effect on the year-end 2011 pension deficit would be a decrease or increase, respectively, of approximately £27 million.

Taxation

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

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

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

• future earnings potential determined through the use of internal forecasts;

• cumulative losses in recent years;

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

• history of loss carryforwards and other tax assets expiring;

• the timing of future reversal of taxable temporary differences;

• the expiry period associated with the deferred tax assets; and

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

If it is our belief that it is probable that some portion of these assets will not be realised, then no asset is recognised in relation to the portion not considered to be realisable. At 31 December 2011 no deferred tax asset has been recognised in respect of gross tax losses and other temporary differences of £4,557.0 million.

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

New IFRS Accounting Pronouncements

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

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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

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

Philip Lader, age 66: Non-executive chairman. Philip Lader was appointed chairman in 2001. The US Ambassador to the Court of St James’s from 1997 to 2001, he previously served in several senior executive roles in the US Government, including as a Member of the President’s Cabinet and as White House Deputy Chief of Staff. Before entering government service, he was executive vice president of the company managing the late Sir James Goldsmith’s US holdings and president of both a prominent American real estate company and universities in the US and Australia. A lawyer, he is also a Senior Advisor to Morgan Stanley, a director of Marathon Oil, AES and Rusal Corporations, a trustee of the Smithsonian Museum of American History and the Atlantic Council and a member of the Council on Foreign Relations.

Sir Martin Sorrell, age 67: Chief executive. Sir Martin Sorrell joined WPP in 1986 as a director, becoming Group chief executive in the same year. He is a non-executive director of Formula One and Alcoa Inc.

Paul Richardson, age 54: Finance director. Paul Richardson became Group finance director of WPP in 1996 after four years with the Company as director of treasury. He is responsible for the Group’s worldwide functions in finance, information technology, procurement, property, treasury, taxation, internal audit and sustainability. He is a chartered accountant and fellow of the Association of Corporate Treasurers. He is a non-executive director of CEVA Group plc, Chime Communications PLC and STW Communications Group Limited in Australia, the last two being companies associated with the Group.

Mark Read, age 45: Strategy director and CEO, WPP Digital. Mark Read was appointed a director in March 2005. He has been WPP’s director of strategy since 2002 and is also chief executive of WPP Digital. He is a member of the Supervisory Board of HighCo and a director of CHI & Partners. He worked at WPP between 1989 and 1995 in both parent company and operating company roles. Prior to rejoining WPP in 2002, he was a principal at the consultancy firm of Booz-Allen & Hamilton and founded and developed the company WebRewards in the UK.

Colin Day, age 57: Non-executive director. Colin Day was appointed a director in July 2005. He is the chief executive of Filtrona plc and a non-executive director of Amec. He was the group finance director of Reckitt Benckiser plc, until April 2011, having been appointed to its board in September 2000. Prior to joining Reckitt Benckiser he was group finance director of Aegis Group plc and previously held a number of senior finance positions with ABB Group plc and De La Rue Group plc. He was a non-executive director of Vero Group plc until 1998, Bell Group plc until 2004, Imperial Tobacco plc until February 2007, easyJet plc until 30 September 2005 and Cadbury plc until 2010.

Esther Dyson, age 60: Non-executive director. Esther Dyson was appointed a director in 1999. In 2004 she sold her company, EDventure Holdings, to CNET Networks, the US-based interactive media company now owned by CBS. She left CNET at the end of 2006 and now operates as an independent investor and writer, again under the name of EDventure. She has been highly influential for the past 25 years on the basis of her insights into online/information technology markets and their social impact worldwide, including the emerging markets of Central and Eastern Europe and Asia. An active investor as well as an analyst/observer, she participated in the sale of Flickr to Yahoo! and of Medstory and Powerset to Microsoft. She sits on the boards of Russia’s leading search company Yandex (YNDX) and also of non-listed start-ups including Evernote, 23andMe, Airship Ventures, Eventful.com, Meetup Inc., NewspaperDirect (Canada), Voxiva (US) and XCOR Aerospace (US). She is also active in public affairs and was founding chairman of ICANN, the domain name policy agency, from 1998 to 2000. She currently sits on the board of the Sunlight Foundation, which advocates transparency in government, and writes a monthly column for Project Syndicate which is distributed worldwide.

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Orit Gadiesh, age 61: Non-executive director. Orit Gadiesh was appointed a director in April 2004. She is chairman of Bain & Company Inc., and a world-renowned expert on management and corporate strategy. She holds an MBA from Harvard Business School, was a Baker Scholar and was also presented the Brown Award. Ms. Gadiesh is a member of the Foundation Board for the World Economic Forum as well a member of the International Business Council of the World Economic Forum. She is on the Board of Directors of The Peres Institute for Peace, sits on the International Advisory Board of The Atlantic Council of the United States, and the Advisory Board for the British-American Business Council. She is the Chairman of the International Business Leaders’ Advisory Council for the Mayor of Shanghai (IBLAC) and sits on the International Advisory Board at HEC School of Management in France.

Ruigang Li, age 42: Non-executive director. Ruigang Li was appointed a director in October 2010. He is Chairman of China Media Capital (CMC). CMC is the first and only sovereign private equity fund dedicated to the media sector in China and abroad. In 2010, CMC forged a strategic partnership with News Corporation’s Star China to jointly develop growth opportunities on operational and investment platforms within China and beyond. Li was president of Shanghai Media Group (SMG) between 2002 and 2011. Under Li’s Leadership, Shanghai Media Group, a multimedia conglomerate based in Shanghai, built the most complete portfolio of media and related businesses and became one of the world’s largest providers and distributors of Chinese language media contents and services. SMG’s business scope spans multiple platforms and disciplines of television, radio, print media, digital media, content distribution, e-commerce, live theatre entertainment and education.

Stanley (Bud) Morten, age 68: Non-executive director. Bud Morten was appointed a director in 1991. He is a consultant and private investor. From 2003 to 2009 he was the Independent Consultant to Citigroup/Smith Barney with responsibility for its independent research requirements. Previously he was the chief operating officer of Punk, Ziegel & Co., a New York investment banking firm with a focus on the healthcare and technology industries. Before that he was the managing director of the equity division of Wertheim Schroder & Co. Inc., in New York. He is a former non-executive of Register.com, which was sold to a private equity firm in November 2005, and of The Motley Fool, Inc., a private company in the financial content business. He is also a non-executive director of Darien Rowayton Bank, a private company.

Koichiro Naganuma, age 67: Non-executive director. Koichiro Naganuma was appointed a director in February 2004. He is chairman of the Board of Asatsu-DK Inc., also known as ADK. He is also vice chairman of Japan Advertising Association and chairman of Japan Advertising Industry Pension Fund. Joining the agency in 1981, he was president and Group CEO from 1991-2010. ADK is Japan’s third largest advertising and communications company, and 15^th largest in the world.

Lubna Olayan, age 56: Non-executive director. Lubna Olayan was appointed a director in March 2005. Ms Olayan is the deputy chairperson and chief executive officer of the Olayan Financing Company, a subsidiary and the holding entity for the Olayan Group’s operations in the Kingdom of Saudi Arabia and the Middle East. Ms Olayan is a Board Member of two publicly listed companies, the Saudi Hollandi Bank and Schlumberger, and sits on the International Advisory Board of Akbank, Rolls-Royce and the National Bank of Kuwait. She is on the Board of Trustees of Cornell University, INSEAD and KAUST (King Abdullah University of Science and Technology) and on the Board of DSCA (Down Syndrome Charitable Association) and Al Fanar, the first Arab venture philanthropy organisation in the Arab region.

John Quelch, age 60: Non-executive director. John A. Quelch was appointed a director in 1988. He is the Dean, Vice President and Distinguished Professor of International Management at China Europe International Business School in Shanghai. Between 2001 and 2011 he was the Lincoln Filene Professor of Business Administration and Senior Associate Dean at Harvard Business School. Between 1998 and 2001 he was Dean of London Business School. Between 2002 and 2011 he served as chairman of the Massachusetts Port Authority, honorary consul general of the Kingdom of Morocco in New England and as honorary chairman of the British American Business Council of New England. Professor Quelch’s writings focus on global business practice in emerging as well as developed markets, international marketing and the role of the multinational corporation and the nation states. He

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is a non-executive director of Alere, Inc and a member of the Council on Foreign Relations. He served previously on the boards of Blue Circle Industries plc, easyJet plc, Pentland Group plc, Pepsi Bottling Group and Reebok International Limited. In the 2011 Honours List he was awarded a CBE for services to the promotion of British business.

Jeffrey A. Rosen, age 64: Non-executive director. Jeffrey Rosen was appointed a director in December 2004. He is a deputy chairman and managing director of Lazard, with over 30 years’ experience in investment banking. He is a member of the Council on Foreign Relations and is President of the Board of Trustees of the International Center of Photography in New York.

Timothy (Tim) Shriver, age 52: Non-executive director. Tim Shriver was appointed a director in August 2007. He is a social leader, educator, activist, film producer and business entrepreneur. As chairman and CEO of Special Olympics, he serves nearly four million Special Olympics athletes in 180 countries all working to promote health, education, and unity through the joy of sports. Before joining Special Olympics in 1995, Shriver was and remains a leading educator focusing on the social and emotional factors in learning. He co-founded and currently chairs the Collaborative for Academic, Social, and Emotional Learning (CASEL), the leading research organization in the field of social and emotional learning. He is a member of the Council on Foreign Relations, and is a non-executive director of Neogenix Oncology and Fisker Automotive.

Paul Spencer, age 62: Non-executive director. Paul Spencer was appointed a director in April 2004. He is a financier with 20 years’ experience in the financial management of a number of blue-chip companies, including British Leyland PLC, Rolls-Royce PLC, Hanson PLC and Royal & Sun Alliance PLC. He has held a number of non-executive directorships including until 2009 chairman of NS and I (National Savings). He is currently chairman of State Street Managed Pension Funds and chairs audit at TR Property Investment Trust PLC. He is the independent Trustee of BT, BA and Rolls-Royce Pension Funds. He is Chairman of Hermes Asset Managers Ltd. In the 2010 Honours List he was awarded a CBE for services to the financial services industry. He is a governor of the charity Motability.

Sol Trujillo, age 60: Non-executive director. Sol Trujillo was appointed a director in October 2010. He is an international business executive with three decades’ experience as CEO of large market cap global companies in the US, the EU and Asia Pacific, including US West (now CenturyLink), Orange (now France Telecom) and Telstra, the Australian communications company. A digital pioneer operating in the telecommunications, technology, and media space, he has been a long-time champion of high-speed broadband and a pioneer and innovator of smartphone and the mobile internet to stimulate productivity and innovation across all sectors of the economy. He has managed operations in more than 25 countries – including developed and emerging markets from the EU and North America to China, South Asia, Africa and the Middle East. He currently sits on corporate boards in the US, EU, and China – including Target and ProAmerica Bank in the US and, in Asia, Silk Road Technologies in China, where he is board chairman. In the public sector, Mr Trujillo served as trade policy advisor to the Clinton and Bush administrations and remains active on public policy issues related to immigration, trade, productivity and fiscal affairs.

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

B. Compensation

Review of compensation

2011 has been another strong year, indeed a record year, for WPP, building on growth in 2010. The Company’s compensation policy has long been linked to the performance of the Group, with a particular focus on delivering strong relative returns over the longer term to share owners. The use of performance-driven compensation ensures the continued alignment of share owner and executive interests and is essential to enable the Company to attract, retain and motivate the most gifted talent in the industry.

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In 2011 the Group delivered excellent performance. Highlights included billing of almost £45 billion, profit before tax breaking the £1 billion barrier for the first time and a 38% increase in dividends per share. This strong performance is reflected in the rewards received under the Company’s incentive plans by our executive directors.

Following the 2011 AGM the Company recognised that a number of share owners had issues with some aspects of the Group’s executive compensation arrangements. The Compensation Committee took into account the feedback from share owners in its continuing review of the Company’s long-term incentive plan, Leadership Equity Acquisition Plan (LEAP), and as part of the ongoing review of the Group chief executive’s compensation, consideration of which began in 2010, and factored this feedback into the final decisions.

While details of all elements of compensation and any changes made to these matters are set out in the following pages, highlights of the key decisions and changes are as follows:

• As part of the Company’s culture of leading in matters of corporate governance, the Company already sought to adopt some of the disclosure measures currently being proposed by the UK Government including greater transparency on short-term incentive measures and a table showing a single figure for executive directors’ total compensation.

• The LEAP III comparator group has been expanded, effective 2011, to include Nielsen, to reflect the greater significance of the consumer insight business within WPP and the emergence of Nielsen as a major public company.

• The revisions in the Group chief executive’s compensation structure (which, along with the compensation structures of the other executive directors and senior management, are reviewed every two years) mark only the second time in the last ten years that salary and incentive compensation have been adjusted. The revisions incorporate constructive input from share owners and their representatives during the consultation process. The committee recognises that the subject of executive compensation is particularly contentious in the current political and governance environment. The committee is sensitive to all the related issues and to its fiduciary obligation to make decisions, sometimes difficult and challenging, believed to be in the best interests of both share owners and the Group. The new package has been shaped by WPP’s guiding principles on compensation, among them the Company’s commitment to provide fully competitive remuneration opportunities, including the potential for superior rewards for exceptional performance. The changes are also designed to reflect the substantial increases in the Group’s size and complexity since the last review in 2007, and to provide an overall level of opportunity that is commensurate with the importance of Sir Martin Sorrell’s contributions to the Group’s success. The committee is of the view that the revisions ensure that the Group chief executive’s compensation is clearly linked to and supports the Group’s strategic objectives, and that the reward levels are properly calibrated to challenging performance conditions.

In summary, the other matters dealt with by the committee in 2011 were:

• supervising the Group’s equity incentive plans that are critical to the attraction and retention of talent;

• overseeing the Group’s cash incentive programs and approval of the awards to the most senior business leaders below the Board; and

• reviewing developments in areas of corporate governance and ensuring the Company’s compliance with regulatory changes.

The link between compensation and business objectives

WPP competes on the basis of its intellectual capital and services. This intellectual capital is created entirely by its people, and the committee endeavours to strike the right balance of fairness between its people and share owners. For this reason, the design of all executive compensation at WPP is governed by three guiding principles: performance-driven reward, competitiveness and alignment with share owner interests.

These three principles are themselves derived from both our mission statement:to develop and manage talent; to apply that talent, throughout the world, for the benefit of clients; to do so in partnership; to do so with profit and our six business objectives (see pages 16 to 17).

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The Compensation Committee regularly reviews fixed and variable compensation against appropriate benchmarks both internal and external. When making decisions on executive compensation, the committee is briefed on the remuneration levels within the Group. This includes, for example, the consideration of salary increases across the organisation when determining executive salary increases. In addition, the committee approves the design of incentive plans and reviews all awards made under those incentive plans.

WPP is committed to aligning executive performance and reward with share owner interests. From a compensation perspective, this is encouraged in a number of ways:

• Total Shareholder Return (TSR) has been chosen as the performance measure for the LEAP plans as it represents a strong objective measure of the success of the Company as far as share owners are concerned;

• share ownership is encouraged for the WPP Leaders (approximately the top 230 executives), all of whom have stretching ownership goals;

• all eligible employees, approximately 47,000, are given a share ownership opportunity through participation in the Worldwide Ownership Plan; and

• the majority of the compensation package of executive directors is paid in the form of shares comprised of deferred share bonus and long-term incentive awards under the LEAP plans.

The charts below show the breakdown of total target remuneration for the executive directors in 2011 and 2012, illustrating both the significant element of pay linked to performance, and the alignment of interests with share owners through the proportion of compensation payable in WPP shares.

In relation to 2011, while the target bonus was to be split half in cash and half in deferred shares, the Compensation Committee determined that, for Sir Martin only, 40% of the bonus achieved would be paid in cash and 60% in deferred shares (ESA) further increasing alignment with share owner interests.

The role of the Compensation Committee in improving risk management

The Compensation Committee is always sensitive to the requirement that the decisions that it makes and the compensation programs the Group has in place serve to improve the management of risk in the Group. In particular:

• incentive plans take into account performance across a broad range of financial and non-financial measures;

• committee meetings are generally held at the time of Board meetings, at which the committee members are usually given a comprehensive briefing on issues and risks facing each of the business units as well as the Group as a whole;

• incentive plans are designed to be attractive in the marketplace to enable WPP to attract and retain key talent that is critical to achieving business success. The plans are designed to motivate, reward and provide as much retention value as possible. The use of deferred share bonuses that normally vest after two years, and the use of restricted share awards that vest after three years, support the business need for employee retention; and

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• clawback provisions have been added into key share incentive plans (i.e. those other than the all-employee plans) to give the committee the right to cancel or reduce unvested share awards should this be justified by a participant’s acts or omissions.

TSR Performance

The Company’s TSR for the period from 31 December 2006 to April 2012 is shown on the graph below. The FTSE 100 is the Index the Board considers most relevant for the purpose of comparison as WPP is a mid-ranking FTSE 100 company. WPP considers its key competitors to be Omnicom, Interpublic and Publicis and it is the performance of these companies with which the Company’s own performance is most commonly compared. For that reason, values for those three companies are also displayed.

Relative TSR Rebased to 31 December 2006

Measured on a common currency basis

The committee thought that share owners would benefit from seeing the effect that foreign exchange rates have had on relative TSR. The following graph (measured on a local currency basis) illustrates the distorting effect of foreign exchange rates on relative TSR performance for the same period.

Relative TSR Rebased to 31 December 2006

Measured on a local currency basis

These graphs have been calculated on a daily return basis and do not reflect the TSR measures used in the LEAP performance calculations.

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Key elements of short and long-term remuneration

The design of compensation policy at WPP ensures a clear and direct link between the performance of the Group and executive compensation. Substantial use of performance-driven compensation not only ensures the continued alignment of share owner and executive interests but also enables the Group to attract, retain and motivate the talented people upon whom our success depends.

In light of this policy, the principal elements of WPP executive compensation currently comprise the following:

• base salaries and fees (fixed);

• short-term incentives paid in cash and shares which vest after two years (variable); and

• long-term incentives paid in shares under LEAP, which are subject to a stretching performance test with participation linked to a significant co-investment requirement over the five-year performance period.

Executive directors are also entitled to receive a pension contribution (or a cash allowance in lieu), life assurance, healthcare and other benefits.

Compensation packages for executive directors and the most senior people at WPP below Board level are normally reviewed every 24 months. These reviews consider the mix of fixed and variable elements of the compensation package, general market conditions and internal factors such as the performance of the Group or relevant business unit and pay and employment conditions elsewhere in the Group or relevant business function.

In determining suitable benchmarks, the Compensation Committee looks at the compensation of executives holding similar roles in competitor organisations and, if appropriate, media industry or general industry data for organisations of comparable size and complexity.

Base salary and fees

	Current salary and fees	Effective date
Sir Martin Sorrell	£1,300,000		1 Jan 2011
Paul Richardson	$925,000 and £100,000		1 Jan 2011
Mark Read	£425,000		1 Jan 2011

As reported in previous years, fees of £100,000 are paid to each of the executive directors in respect of their directorships of WPP plc and are included in the numbers above.

The committee undertook an extensive review of the executive directors’ compensation at the end of 2010 and considered that increases to the base salaries of the executive directors were appropriate.

The consideration in respect of Sir Martin’s base salary continued during 2011, and the committee consulted share owners in the summer with regard to quantum and the structure for Sir Martin’s remuneration arrangements. Having adjusted the proposals following that consultation, the arrangements were finalised towards the end of 2011. The decision was made to increase Sir Martin’s base salary and fee from £1,000,000 to £1,300,000. That was the first increase to Sir Martin’s base salary since 1 January 2007 (which was the only increase since September 1999). Since 2007, the Group has continued to grow in scale and complexity, with worldwide headcount increasing from fewer than 80,000 people in 2,000 offices to over 113,500 people in over 2,500 offices, and significant revenue and earnings per share increases. The level of the increase in compensation was determined by several factors including business and personal performance, competitive pay levels and the extended time period since the last review.

Paul Richardson’s and Mark Read’s base salaries were reviewed during 2010 and no further review was undertaken in 2011.

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Retirement benefits

All pension benefits for the Company’s executive directors are provided on either a defined contribution or a cash allowance basis. Only the aggregate of base salary and director fees is pensionable. As part of the committee’s review of the chief executive’s compensation, the allowance for Sir Martin was increased from 40% to 45% of base salary and fee, effective from 1 January 2011. Paul Richardson’s cash allowance and Mark Read’s pension contributions remained unchanged at 30% and 10% respectively. Details of pension contributions or allowances for executive directors for the period under review are set out on page 49.

Short-term incentives

WPP sets stretching performance targets for each operating company on an annual basis. Performance against these targets determines the size, if any, of the incentive pool for that business unit. In aggregate, incentive payments in 2011 were £338.2 million, reflecting strong Group financial performance. That strong performance is reflected in the bonuses paid to executive directors.

Individual targets (both financial and strategic) for the operating company CEOs are set by WPP and in turn, these CEOs set similar targets for employees who report directly to them. Payment is in the form of both cash bonuses and deferred shares which vest a further two years after grant. The grant of those deferred share awards typically occurs within three months of the end of the financial year.

In a similar way, the committee sets objectives for the executive directors. The extent to which these objectives are met will determine the size of both annual cash bonuses (under the short-term incentive plan, or STIP) and Executive Share Awards (ESAs, the portion of the annual bonus paid in shares which normally vest a further two years after grant). Since 2010 unvested ESAs are subject to clawback provisions, which give the committee the right to cancel or reduce unvested share awards should this be justified by a participant’s acts or omissions.

Effective 2011 the committee adjusted the bonus opportunity for all executive directors. These adjustments provide for a better balance of the cash and share incentive elements of their remuneration. As explained last year, the decision regarding adjustments to Sir Martin’s incentive opportunities was unconfirmed, as the committee was keen to engage with share owners on that subject. Following the share owner consultation process, the committee decided to adjust the target and maximum bonus opportunity, effective 2011, from 167% to 250% at target and from 300% to 500% at maximum (with at least half being delivered in the form of deferred shares), as shown in the table below. As noted above, these adjustments reflect the fact that WPP is now a considerably larger and more complex organisation than in 2007, when Sir Martin’s compensation was last reviewed. The rapid growth of the organisation and the increasing complexity of the sector have resulted in Sir Martin’s role becoming significantly more demanding and the committee believes that there should be greater reward opportunity available for success. These adjustments strengthen further the direct and clear link between reward and performance and are better aligned to the incentive opportunities available at our direct competitors.

	Cash				ESA
% of base salary and fees	Target %		Max %		Target %		Max %
Sir Martin Sorrell		125		250		125		250
Paul Richardson		100		150		100		150
Mark Read		67		100		67		100

The STIP seeks to incentivise the executive directors to achieve specific goals over a one-year period, while continuing to contribute to the on-going and sustainable success of WPP and demonstrating the core values of ownership and alignment of interests with share owners. Consistent with previous years, the plan rewards for performance in three equally weighted areas shown in the following tables (financial, strategic and business performance). Except for the Group financial objectives, the exact measures differ for each individual executive director.

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In 2011 the Group achieved double-digit growth in all the core measures including revenue, profit before tax and earnings per share. In addition, our profit margin improved strongly while we increased the number of employees by 9.2% to over 113,500 across the Group. The Group was also recognised at Cannes for its creative leadership. The following tables summarise the measures in place for 2011, along with the committee’s assessment of the level of performance.

Sir Martin Sorrell	2011 target performance range	Achievement	Actual bonus (% of salary)
Group financial objectives	Headline PBT growth; headline PBT margin improvement and revenue growth.	Above Maximum		167%
Individual strategic objectives	Relative financial performance of WPP against key competitors.	Target		83%
Key business achievements	Creative reputation recognition; succession planning; capital effectiveness and acquisition success.	Target to Maximum		135%
Total				385%
In 2011 the committee decided that a greater portion (60%) of the achieved total bonus be delivered in the form of deferred shares (ESA)
Paul Richardson	2011 target performance range	Achievement	Actual bonus (% of salary)
Group financial objectives	Headline PBT growth; headline PBT margin improvement and revenue growth.	Above Maximum		100%
Individual strategic objectives	Cost reduction in IT, Finance and Establishment; property management.	Target to Maximum		90%
Key business achievements	Development of sustainability strategy and practice; finance talent development.	Target to Maximum		85%
Total				275%
To be delivered as 50% deferred shares (ESA) and 50% cash
Mark Read	2011 target performance range	Achievement	Actual bonus (% of salary)
Group financial objectives	Headline PBT growth; headline PBT margin improvement and revenue growth.	Above Maximum		67%
Individual strategic objectives	Digital performance and improvement of the Group’s digital assets and capability through acquisition and development of data and technology strategy; successfully integrate acquisitions.	Target to Maximum		60%
Key business achievements	Develop WPP Digital through the launch of Possible Worldwide, Xaxis and other initiatives.	Target to Maximum		63%
Total				190%
To be delivered as 50% deferred shares (ESA) and 50% cash

The committee has determined that deferred shares (ESAs) will, subject to continued employment, vest after two years.

The executive directors are eligible to participate (although, in 2011, have chosen not to participate) in a cash bonus deferral plan whereby they can defer receipt of part of their bonus for four years, and receive a 25% match in the form of WPP shares (subject to continuous employment).

Bonus opportunity for the executive directors will be unchanged for 2012, but the measures and ranges will be assessed in light of expectations and the business strategy, meaning that they may change depending on the strategic imperatives for 2012.

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Long-term incentives

During the latter part of 2011, the committee reviewed the long-term incentive plans to assess whether they continued to meet the strategic objectives of the Company. The conclusion of the review was that the plan design, grant levels and vesting schedules remained appropriate and well suited to the nature of the business. While the committee believes that the relative TSR measure used in LEAP for a number of years continues to be the most appropriate performance measure, the committee periodically reviews whether the Plan would be strengthened by the addition of one or two further non-market measures in order to balance TSR.

Other than share options, it is intended that all awards will be satisfied out of WPP shares held in treasury or one of the Company’s employee share ownership plans (ESOPs).

Leadership Equity Acquisition Plan III

In 2011, awards under LEAP III were made to 15 of the Group’s key executives. Details of the awards made to the executive directors can be found on page 51.

LEAP III is a co-investment plan under which participants must make and retain an investment in WPP shares (investment shares) in order to be eligible to receive awards. The committee may also extend the invitation to participate in the Plan to include options over WPP shares as part of the co-investment commitment. In 2011, participants were not given this opportunity.

LEAP III awards provide participants with the opportunity to earn additional WPP shares to match their investments (matching shares). The number of matching shares that a participant can receive at the end of the investment and performance period depends on the Company’s TSR performance measured over five years and compared with a peer group.

Following the end of a performance period, the Plan rules require the committee to perform a ‘fairness review’ dependent upon which it may, in exceptional circumstances, decide to vary the number of matching shares that will vest.

As previously reported in the 2010 Compensation Committee report, the 2006 award vested in March 2011 with a match of 4.14 shares for each investment share committed.

Vesting of the 2007-2011 LEAP award

In undertaking the fairness review described above for the 2007-2011 LEAP award, the committee considered a broad range of factors when determining whether the relative TSR result was representative of Group performance over the five-year performance period from January 2007 to December 2011, and the extent to which there were factors that required the result to be adjusted. For the vesting of the 2007 award the committee considered the following factors:

• the impact of major exchange rate shifts on the common currency TSR calculation (as illustrated by the TSR graphs shown on page 41);

• the underlying financial performance of the Company relative to its peers, covering a range of measures including EPS, PBIT, margin and revenue growth; and

• the constituents of the comparator group and whether there were any extraordinary events that could have had a positive or negative impact on their TSR performance.

On review, the committee determined that there had been no significant events at any of the comparator group companies during the performance period and, therefore, no adjustment was required.

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In respect of the first factor, during the performance period sterling dropped sharply against the other currencies that feature in our peer group, falling 45% against the yen, 22% against the euro and 16% against the US dollar. This dramatic currency shift is a factor that the committee has previously had to consider when determining the vesting for prior awards, once adjusting the match upwards from the common currency result and once adjusting the match downwards. These significant currency movements meant that, while on a local currency basis WPP’s TSR ranked between second and third place (above both Omnicom and Interpublic and equating to a match of 4.62), on a common currency basis WPP ranked below median, equating to zero vesting.

The committee was of the view that the unprecedented turmoil in the currency markets during the financial crisis was an extraordinary event. Given the very international focus of the comparator group, (with all but one of our comparators listed outside the UK) and the five-year investment and performance period, this event has impacted several award cycles under the Plan including some awards that are yet to vest. While the committee has previously considered and adjusted for the impact of currency fluctuations, this is the most significant impact that has been observed to date.

The committee determined that this factor of currency, which was outside management control, had materially affected WPP’s relative TSR ranking and meant that the common currency TSR result was not a fair reflection of the Company’s true performance relative to its peers. This was supported by a review of the Company’s financial performance relative to the comparator group. Therefore, the committee’s judgement was to use the average of the common and local currency results, resulting in a match of 2.31 for the 2007 awards (which was also consistent with the underpinning measures considered by the committee). This implies a ranking between fourth and fifth out of nine companies, which the committee felt to be more representative of the Company’s underlying performance over the five-year performance period.

Management share incentive plans

The Company uses share-based compensation methods across the workforce, which not only helps the Company to incentivise, retain and recruit talent, but also encourages a strong ownership culture among employees. Share awards are granted under the Restricted Stock Plan, and share option awards are granted to employees under either the Executive Stock Option Plan or the Worldwide Ownership Plan.

• The Restricted Stock Plan is used to satisfy awards under the short-term incentive plans (including the ESAs) as well as to grant awards under the WPP Leaders, Partners and High Potential program. This program is used to reward, retain and align the interests of about 1,250 of our key executives with the interests of share owners. In the program, awards are made to participants that vest three years after grant, provided the participant is still employed within the Group. Executive directors are ineligible to participate in the WPP Leaders, Partners and High Potential program, although they are eligible to receive ESAs under the Restricted Stock Plan.

• The Executive Stock Option Plan is used to make special grants of options in order to attract or retain key talent. One award was granted to an employee in 2011 (none were granted in 2010).

• The Worldwide Ownership Plan is an all-employee plan that makes annual grants of stock options to employees with two years of service who work in wholly-owned subsidiaries. During 2011, awards were made to over 47,000 employees. By 31 December 2011, options under this plan had been granted to approximately 110,400 employees over 49.2 million shares since March 1997. Executives who participate in one of the other share plans described above are ineligible to participate in this plan.

Share incentive dilution for 2001 to 2011

The share incentive dilution level, measured on a 10-year rolling basis, has remained constant at 4.4% at 31 December 2011 (2010: 4.4%). It is intended that awards under all plans, other than share options, will all be satisfied with purchased shares held either in the ESOPs or in treasury.

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Compensation in 2012

Having set out the Compensation Committee’s decisions and the changes to compensation during 2011, the Committee wishes to keep share owners informed of the policy that it intends to apply in 2012. This policy can be summarised as:

• the base salary and fees of all executive and non-executive directors will be unchanged;

• pension contributions and cash allowances for the executive directors will be unchanged;

• executive directors’ entitlement to STIP and ESA opportunity will be unchanged;

• executive directors’ entitlement to participate in LEAP will be unchanged; and

• LEAP performance measures will be reviewed and if changes are thought appropriate, share owners will be consulted.

The Committee will also continue to monitor the UK Government’s proposed changes in the area of executive pay and the consequential implications on disclosure and future pay policy.

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Key elements of short and long-term remuneration

	Objective	Participation	Performance period	Conditions	Change of control
Short-term
Base salary	To maintain package competitiveness at all levels within the Group.	All employees.	n/a	Salary levels are determined by taking a number of relevant factors into account, including individual and business unit performance, level of experience, scope of responsibility and the competitiveness of total remuneration.	n/a
Cash bonus	To incentivise delivery of value at all levels within the Group.	Approximately 10% of employees are eligible to receive a performance bonus.	1 year	Achievement of challenging performance goals (financial and non- financial) at the individual and business unit level.	The cash bonuses of executive directors do not crystallise on a change of control.
Performance share awards	To incentivise delivery of value and to align with interests of share owners.	Key operating company executives.	1 year	Achievement of challenging performance goals (financial and non- financial) at operating company level. Further two-year retention period.	See note below for Restricted Stock Plan.
Executive share awards	To incentivise delivery of value and to align with interests of share owners.	Key head office executives and executive directors.	1 year	Achievement of challenging individual annual bonus objectives. Further two- or three-year retention period.	See note below for Restricted Stock Plan.
Long-term
LEAP III and Renewed LEAP	To incentivise long-term performance by comparing WPP’s TSR against the TSR of key comparators (which are weighted by market capitalisation in the case of LEAP III), and to maximise alignment with share owner interests through a high level of personal financial commitment.	Participation offered only to those key executives (currently no more than 20 people) whose contributions transcend their day-to-day role, including executive directors.	5 years	Relative TSR performance against a group of key communication services comparator companies, (weighted by market capitalisation in the case of LEAP III), subject to a fairness review by the Compensation Committee.	On a change of control, the investment period for all outstanding awards ends, the number of vesting shares is determined at that date (pro-rated in the case of LEAP III) and any other rights cease. The number of shares that vest may be reduced to prevent adverse US tax provisions applying. The Compensation Committee may determine that outstanding awards are exchanged for equivalent awards.
Restricted Stock Plan	To encourage a share ownership culture and long-term retention as well as supporting recruitment.	Directors and senior executives of the operating companies and senior head office executives.	n/a	Typically three-year retention period.	The vesting period for all outstanding awards is deemed to end. The Compensation Committee may determine that outstanding awards are exchanged for equivalent awards or that outstanding awards are unaffected by the change of control.
Executive Stock Option Plan	To provide a tool to promote retention and recruitment.	Occasional use only to deal with special situations.	3 years	Conditions, if any, are determined at the time of grant of the award.	The number of shares or ADRs is pro-rated down in accordance with the change of control date. The Compensation Committee may determine that outstanding awards are unaffected by the change of control.
Worldwide Ownership Plan	To develop a stronger ownership culture.	Employees with at least two years’ employment. Not offered to those participating in other share programs or to executive directors.	n/a	Three-year vesting period.	The number of shares or ADRs is pro-rated down in accordance with the change of control date. The Compensation Committee may determine that outstanding awards are unaffected by the change of control.

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Directors’ remuneration

For the fiscal year ended 31 December 2011 the aggregate compensation paid by WPP to all directors and officers of WPP as a group for services in all capacities was £23.6 million. Such compensation was paid by WPP and its subsidiaries primarily in the form of salaries, performance-related bonuses, other benefits and deferred share awards. The sum of £0.9 million was set aside and paid in the last fiscal year to provide pension benefits for directors and officers of WPP.

Executive directors’ emoluments

The value of salary and fees, benefits, pension contributions and annual incentives paid both in cash (under the STIP) and shares (ESAs) for the year ending 31 December 2011 are set out in the table below. The table also shows comparative numbers for 2010. In the case of the STIP and ESAs, the figures shown are the value of the awards in respect of the year in question (although they were received in the following year). Benefits include such items as healthcare, life assurance, spouse travel and allowances for cars and housing. Both Sir Martin Sorrell and Paul Richardson currently receive part of their remuneration in pounds sterling and part in US dollars. Any US dollar amounts received in 2011 have been converted into sterling at an exchange rate of $1.6032 to £1 ($1.5461 for 2010).

									Short-term incentives
	Salary and fees				Other benefits				Annual cash bonus (STIP)				Deferred share bonus (ESA)				Total annual remuneration				Pension contributions
	2011		2010		2011		2010		2011		2010		2011		2010		2011		2010		2011		2010
	£000		£000		£000		£000		£000		£000		£000		£000		£000		£000		£000		£000
Executive directors
Sir Martin Sorrell1, 2, 3		1,306		1,009		459		374		2,002		1,900		3,003		950		6,770		4,233		585		400
Paul Richardson		677		637		100		106		930		682		930		757		2,637		2,182		198		191
Mark Read		425		325		3		2		404		219		404		293		1,236		839		43		33
Total remuneration		2,408		1,971		562		482		3,336		2,801		4,337		2,000		10,643		7,254		826		624

¹  During 2011 an amount of approximately £7,402 was paid to Sir Martin Sorrell in respect of tax liabilities incurred by him on expenditure on various items considered by the UK Tax authorities as benefits in kind but which the committee consider to be essential to his ability to deliver his services successfully to the Group (£6,813 in 2010).

²  Payments made in accordance with the approval granted by share owners of amounts equal to the dividends that would be payable (totalling £1,339,364) were made to Sir Martin Sorrell during 2011 (£1,081,172 during 2010) in respect of the shares reflected in the UK and US Deferred Stock Units Awards Agreements (which are the agreements that now comprise the awards granted under the Capital Investment Plan in 1995).

³  Benefits include other items such as healthcare, life assurance, spouse travel, allowances for cars and housing.

Non-regulatory information on executive directors’ compensation

There are often differences between the compensation amounts which our executive directors are granted in any particular year and the amounts they actually receive. This is because, in addition to cash (base salary and fees, pension and STIP), executive directors (and other senior management in the Group) are also awarded deferred shares (ESAs) as part of their annual bonus. ESA awards usually vest two years after grant, and can only be sold once vested.

In the case of LEAP awards, as is described elsewhere in this report, executive directors are annually invited to participate in LEAP. Such invitation requires the executive director to make and retain an investment in shares as determined by the committee. At the end of a five-year performance period (which begins in the year of grant of a LEAP award), the committee determines the number of matching shares to which participants are entitled, using criteria which are explained on pages 45 to 46. The matching shares, if any, are not received (and cannot be sold) by the participant until the performance period has ended and the committee has made that determination.

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The committee believes that it is more transparent, and in the spirit of the UK government’s current proposed changes in the area of executive pay, to disclose the value of amounts received by each executive director (based on the timing differences described above) in addition to the previous emoluments table (which is required by statute). The information contained in the below table is not required by statute.

Benefits include such items as healthcare, life assurance, spouse travel and allowances for cars and housing. Both Sir Martin Sorrell and Paul Richardson currently receive part of their remuneration in pounds sterling and part in US dollars. Any US dollar amounts received in 2011 have been converted into sterling at an exchange rate of $1.6032 to £1.

Amounts received by executive directors in 2011

					Short-term incentives
	Salary and fees		Other benefits1		Annual cash bonus (STIP)2		Deferred share bonus (ESA)3		Pension contributions		Dividend equivalents4		Deferred bonus5		LEAP award6		Total annual remuneration
	£000		£000		£000		£000		£000		£000		£000		£000		£000
Executive directors
Sir Martin Sorrell		1,306		459		2,002		1,694		585		1,340		—		5,575		12,961
Paul Richardson		677		100		930		1,237		198		—		—		2,484		5,626
Mark Read		425		3		404		517		43		—		98		621		2,111
Total received     remuneration		2,408		562		3,336		3,448		826		1,340		98		8,680		20,698

¹  Benefits include items such as healthcare, life assurance, spouse travel, allowance for cars and housing.

²  The annual cash bonus (STIP) is in respect of 2011 performance (paid in April 2012).

³  The deferred share bonus (ESA) is in respect of 2008 performance (granted in March 2009 and vested in March 2011).

⁴  Payments made in accordance with the approval granted by share owners of amounts equal to the dividends that would be payable were made to Sir Martin Sorrell during 2011 in respect of the shares reflected in the UK and US Deferred Stock Units Awards Agreements (which are the agreements that now comprise the awards granted under the Capital Investment Plan in 1995).

⁵  The deferred bonus is an ABDP award in respect of 2006 performance (granted in April 2007 and vested in March 2011).

⁶  The value of the 2006-2010 LEAP award on vesting is the market value of the matching shares associated with the 2006 LEAP awards on the date of vesting (March 2011).

The following table shows the number and value (as at 31 December 2011) of WPP shares required to be held by the executive directors for five years, as an investment in WPP, to entitle them to receive any matching shares on vesting of their awards under LEAP. In addition to retaining such significant investments in WPP, the vesting of any matching shares is conditional on WPP’s relative TSR performance against the comparator group (as explained on pages 45 to 46).

	Aggregate number of shares committed to LEAP at 31 December 2011	Value of investment at 31 Dec 20111 £000
Sir Martin Sorrell	1,861,041		12,571
Paul Richardson	473,530		3,199
Mark Read	119,586		808

¹  Share price at 31 December 2011: £6.755

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ESAs and Restricted Stock Awards held by executive directors

All awards made under the Restricted Stock Plan are made on the basis of satisfaction of previous performance conditions and are subject to continuous employment until the vesting date. The table does not include grants in relation to the 2011 ESA as these were not granted at the time of going to print.

		Award date		Share plan	Share/ADR price on grant date		No. of shares/ADRs originally awarded		Value on grant day 000		Additional shares granted in lieu of dividends			Total shares vesting		Vesting date		Share price on vesting		Value on vesting 000
Sir Martin Sorrell	2008 ESA Award		09.03.09	ESA		£3.83625		196,285		£753		11,730			208,015		06.03.11		£8.145	£	1,694
	2009 ESA Award		04.05.10	ESA		£6.7775		80,560		£546		—			—		06.03.13		—		—
	2010 ESA Award		31.03.11	ESA		£7.6825		123,657		£950		—			—		06.03.13		—		—
Paul Richardson	2008 ESA Award		09.03.09	ESA		£3.83625		143,369		£550		8,567			151,936		06.03.11		£8.145	£	1,237
	2009 ESA Award1		04.05.10	ESA		$51.59		11,813		$609		—			—		06.03.13		—		—
	2010 ESA Award1		31.03.11	ESA		$61.76		19,121	$	1,181		—			—		06.03.13		—		—
Mark Read	Def Bonus 2006		27.04.07	Deferred bonus		£7.4775		9,526		£71		3,472	2		12,998		16.03.11	£	7.575		£98
	2008 ESA Award		09.03.09	ESA		£3.83625		59,954		£230		3,582			63,536		06.03.11		£8.145		£517
	2009 ESA Award		04.05.10	ESA		£6.7775		23,164		£157		—			—		06.03.13		—		—
	2010 ESA Award		31.03.11	ESA		£7.6825		38,138		£293		—			—		06.03.13		—		—

¹  Paul Richardson’s 2009 and 2010 ESA Awards were granted in respect of ADRs.

²  Represents the combined total of matching shares and shares granted in lieu of dividends.

Long-Term Incentive Plan Awards — Leadership Equity Acquisition Plans

Name	Grant / award date	Investment and performance period		Number of investment shares	Share price on grant date		Maximum number of matching units at  1 Jan 2011		During 2011							Maximum number of matching units at 31 Dec 2011		Share price on vest/ deferral date		Value on vest/ deferral date 000
									Granted/ (lapsed) units			Additional dividend shares		Vested or deferred shares
Sir Martin Sorrell	15.11.06		01.01.06 –31.12.10	156,536		£6.84		782,680		(134,621	)		74,188		722,247		782,680		£7.72	£	5,575
	11.12.07		01.01.07 –31.12.11	148,742		£6.23		743,710		—			—		—		743,710		—		—
	31.10.08		01.01.08 –31.12.12	218,596		£3.749		1,092,980		—			—		—		1,092,980		—		—
	15.12.09		01.01.09 –31.12.13	365,878		£6.1025		1,829,390		—			—		—		1,829,390		—		—
	24.11.10		01.01.10 –31.12.14	416,666		£7.2475		2,083,330		—			—		—		2,083,330		—		—
	07.12.11		01.01.11 –31.12.15	711,159		£6.6475		—		3,555,795			—		—		3,555,795		—		—
Paul Richardson	15.11.06		01.01.06 –31.12.10	66,102		£6.84		330,510		(56,848	)		31,328		304,990		330,510		£8.145	£	2,484
	11.12.07		01.01.07 –31.12.11	59,497		£6.23		297,485		—			—		—		297,485		—		—
	31.10.08		01.01.08 –31.12.12	109,298		£3.749		546,490		—			—		—		546,490		—		—
	15.12.09		01.01.09 –31.12.13	103,423		£6.1025		517,115		—			—		—		517,115		—		—
	24.11.10		01.01.10 –31.12.14	100,968		£7.2475		504,840		—			—		—		504,840		—		—
	07.12.11		01.01.11 –31.12.15	100,344		£6.6475		—		501,720			—		—		501,720		—		—
Mark Read	15.11.06		01.01.06 –31.12.10	16,525		£6.84		82,625		(14,212	)		7,832		76,246		82,625	£	8.145		£621
	11.12.07		01.01.07 –31.12.11	14,874		£6.23		74,370		—			—		—		74,370		—		—
	31.10.08		01.01.08 –31.12.12	21,859		£3.749		109,295		—			—		—		109,295		—		—
	15.12.09		01.01.09 –31.12.13	27,406		£6.1025		137,030		—			—		—		137,030		—		—
	24.11.10		01.01.10 –31.12.14	25,281		£7.2475		126,405		—			—		—		126,405		—		—
	07.12.11		01.01.11 –31.12.15	30,166		£6.6475		—		150,830			—		—		150,830		—		—

Awards granted in 2006, 2007 and 2008 were granted under the Renewed Leadership Equity Acquisition Plan. Awards granted in 2009, 2010 and 2011 were granted under the Leadership Equity Acquisition Plan III.

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Vesting Schedules

The vesting schedules used for the various awards under both plans are shown in the following tables. In respect of awards granted in 2007 and 2008, when actual performance falls between these positions, the match is calculated on a proportionate basis. In respect of awards granted in 2009, 2010 and 2011, when actual performance is not exactly equal to a percentile in the table below, but is more than 50% and less than 90%, the percentage of matching shares will be determined on a straight-line basis between the relevant figures.

Awards granted in 2007
Rank compared to comparator group	Number of matching shares
1		5
2		5
3		4.5
4		3.5
5		2.5
Median		1.5
Below median		0

Awards granted in 2008
Rank compared to comparator group	Number of matching shares
1		5
2		5
3		4
4		3
Median		1.5
Below median		0

Awards granted in 2009, 2010 and 2011
Aggregate market capitalisation percentile	Number of matching shares
90th percentile		500%
80th percentile		420%
70th percentile		330%
60th percentile		240%
50th percentile		150%
40th percentile		0%
30th percentile		0%
20th percentile		0%
10th percentile		0%
Bottom		0%

52

Comparator Groups

The comparator groups used for the awards under Renewed LEAP (2007 and 2008) and LEAP III (2009, 2010 and 2011) are shown in the following table. Where a company that delists during a performance period has an undisturbed share price for less than 40% of that performance period, the Compensation Committee would usually exclude that company from the comparator group for the award in question. Otherwise, the company would usually be deemed to be disposed of and the proceeds reinvested, in respect of LEAP III, in a market capitalisation weighted index, and in respect of Renewed LEAP, in a non-market capitalisation weighted index, both of which track the TSR of the remaining comparator companies.

Grant year	Comparator group
2007	Aegis, Arbitron, Dentsu, Gfk, Havas Advertising, Interpublic, Ipsos, Omnicom Group, Publicis and Taylor Nelson Sofres
2008	Aegis, Arbitron, Dentsu, Gfk, Havas Advertising, Interpublic, Ipsos, Omnicom Group and Publicis
2009	Aegis, Arbitron, Dentsu, Gfk, Havas, Interpublic, Ipsos, Omnicom Group and Publicis
2010	Aegis, Arbitron, Dentsu, Gfk, Havas, Interpublic, Ipsos, Omnicom Group and Publicis
2011	Aegis, Arbitron, Dentsu, Gfk, Havas, Interpublic, Ipsos, Nielsen, Omnicom Group and Publicis

Non-executive directors’ remuneration

The fee structure used to compensate the non-executive directors (NEDs) is as follows:

Position/role	2011 fees
Chairman	£	425,000
Senior independent director	£	20,000
Non-executive director	£	65,000
Chairmanship of Audit or Compensation Committee	£	40,000
Chairmanship of Nomination and Governance Committee	£	15,000
Member of Audit and Compensation Committee	£	20,000
Member of Nomination and Governance Committee	£	5,000

The fees paid to NEDs are normally reviewed every two years and any changes are approved by the Board. UK-based NEDs who are required to travel outside the UK to consider Company-related matters at meetings called at short notice will be paid £1,000 for attendance at each of those meetings. The fees detailed above are the only payments receivable by NEDs. Mr Morten will also be paid a fee of £20,000 for additional services that he provides to the Board. NEDs receive no other payments or benefits other than those fees detailed in the table below.

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The table below shows actual fees paid for the year 2011. The notice period for all NEDs is two months.

Director	Date of original contract		Expiry of current contract		Committee membership	2011 £000		2010 £000
P Lader1		26.02.01		05.10.14	Chairman of the Company, chairman of Nomination and Governance Committee and member of Compensation Committee		425		315
C Day		25.07.05		05.10.14	Member of Audit Committee and member of Compensation Committee		112		65
E Dyson		29.06.99		05.10.14	Member of Compensation Committee and member of Nomination and Governance Committee		90		70
O Gadiesh		28.04.04		05.10.14	Member of Nomination and Governance Committee		70		65
R Li		11.10.10		11.10.13			65		14
S W Morten2		02.12.91		05.10.14	Ex officio member of all committees		85		70
K Naganuma3		23.01.04		05.10.14			—		—
L Olayan4		18.03.05		05.10.14	Member of Nomination and Governance Committee		70		—
J A Quelch5		10.07.91		05.10.14			70		94
J Rosen		20.12.04		05.10.14	Chairman of Compensation Committee, member of Audit Committee and senior independent director		145		82
T Shriver		06.08.07		05.10.14	Member of Compensation Committee		85		65
P Spencer		28.04.04		05.10.14	Chairman of Audit Committee		106		80
S Trujillo		11.10.10		11.10.13	Member of the Audit Committee		85		15

¹  From 1 January 2011, the chairman is not entitled to any further fees or salary for either chairmanship or membership of any of the Company’s committees.

²  Fee includes ex officio payment of £20,000 (£6,000 in 2010).

³  Received no fees in 2010 and 2011.

⁴  Waived fee in 2010.

⁵  Fee includes £4,680 (£34,038 in 2010) for consulting services.

C. Board Practices

In accordance with the UK Corporate Governance Code, the directors will submit themselves for annual re-election at each Annual General Meeting. Directors may be appointed by share owners by ordinary resolution or by the Board on the recommendation of the Nomination and Governance Committee and must then stand for re-election at the next Annual General Meeting where they may be re-elected by ordinary resolution of the share owners.

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

All directors are fully briefed on important developments in the various business activities which the Group carries out worldwide and regularly receive extensive information concerning the Group’s operations, finances, risk factors and its people, enabling them to fulfil their duties and obligations as directors. The directors are also frequently advised on regulatory and best practice requirements which affect the Group’s businesses on a global basis.

During 2011, the Board met seven times formally and held 17 committee meetings throughout the year. With the exception of Lubna Olayan, Tim Shriver, Colin Day, John Quelch, Paul Spencer, Sol Trujillo and Orit Gadiesh (each absent for one meeting) and Ruigang Li (absent for four meetings) and Koichiro Naganuma (who was only able to attend one meeting), there was full attendance at all formal meetings of the Board during 2011.

The shareholdings of non-executive directors are set out on page 59. Non-executive directors do not participate in the Company’s pension, share option or other incentive plans, but may receive a part of their fees in ordinary shares of the Company and may participate in the Company’s deferred compensation program.

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

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

Details of directors’ remuneration and service contracts are provide in Item 6B.

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

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

Policy on directors’ service contracts, notice periods, termination payments and external appointments

The Company’s policy is that contracts should be on a rolling basis and will not include either a fixed term or liquidated damages provisions. Sir Martin Sorrell’s service contract may be terminated by the Company or by Sir Martin without, in either case, notice needing to be given — a so-called ‘contract at will’. This means that the Company may terminate Sir Martin’s service contract without the need to pay compensation for any notice period.

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

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

Composition of the Compensation Committee

During 2011, the Compensation Committee comprised the following:

• Jeffrey Rosen (chairman of the committee);

• Colin Day;

• Esther Dyson;

• Philip Lader; and

• Tim Shriver.

No member of the committee has any personal financial interest (other than as a share owner as disclosed on page 59) in the matters to be decided by the committee, potential conflicts of interest arising from cross-directorships or day-to-day involvement in running the Group’s businesses.

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

55

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

• reviewing and approving the Company’s compensation strategy;

• determining appropriate remuneration for executive directors;

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

• maintaining appropriate procedures for evaluation of executive performance;

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

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

• reviewing proposed special incentive awards to senior executives;

• monitoring prohibitions on personal loans to directors and officers;

• determining targets for performance-related pay schemes;

• advising on any major changes in employee benefit structures;

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

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

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

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

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

Advisors to the Compensation Committee

The Compensation Committee regularly consults with Group executives, particularly the Group chief executive (who is not present when matters relating to his own compensation or contracts are discussed and decided), the Company Secretary, the chief talent officer and the worldwide director of compensation and benefits. The latter two individuals provide a perspective on information reviewed by the committee and are a conduit for requests for information and analysis from the Company’s external advisors. Towers Watson are the committee’s appointed compensation advisors; they did not provide any other material services to the Group.

The committee receives external advice on all matters pertaining to the determination of fair and appropriate compensation packages for the executive directors including competitive practices in comparator companies.

Review of the Audit Committee

During 2011, the Audit Committee comprised Paul Spencer, Jeffrey Rosen, Colin Day and Sol Trujillo.

Meetings of the Audit Committee, of which there were seven during 2011, were also attended (by invitation for all or part of any meeting) by the external auditors, the Company’s chairman, the Group finance director, Bud

56

Morten, the director of internal audit, the Group chief counsel, deputy Group chief counsel and the Company Secretary. Preparatory meetings were also held with the internal and external auditors as well as members of the Company’s senior management including the heads of the tax, treasury, legal and group reporting teams. The committee received presentations from the heads of internal audit, finance and treasury. The committee also received reports from the Disclosure Committee in relation to the Disclosure Committee’s review and work on financial reports. The Board received regular reports on all matters of particular significance arising at the committee meetings.

The committee’s terms of reference, which are reviewed with the Board annually and most recently in April 2012, are available for inspection on the Company’s website at www.wpp.com and at all general meetings of the Company. This Annual Report on Form 20-F does not incorporate by reference information on the Company’s website.

During the year, the committee and its members were formally assessed by the chairman of the Company for their technical suitability to be members and also for its overall effectiveness. The Board has designated Paul Spencer as the committee’s financial expert for Sarbanes-Oxley Act (SOX) purposes and as having recent and relevant financial experience for the purposes of the Combined Code and the UK Corporate Governance Code.

The committee has once again overseen the progress towards compliance with Section 404 of SOX for 2011, through regular status reports submitted by the internal and external auditors.

The committee received and reviewed regular reports on both the Company’s Right to Speak helpline, which is made available to employees to enable them to communicate confidentially on matters of concern and the actions taken in response to those calls.

The committee has established a policy regarding non-audit services that may be provided by the external auditors, which prohibits certain categories of work in line with relevant guidance on independence, such as ethical standards issued by the Auditing Practices Board and SOX. Other categories of work may be provided by the auditors if it is appropriate for them to do so. The provision of such services and associated fees are pre-approved by the committee, either as individual assignments or as aggregate amounts for specified categories of services. All fees are summarised periodically for the committee to assess the aggregate value of non-audit fees against audit fees. The level of fees for 2011 is shown in note 3 to the financial statements and in Item 16C.

In line with the committee’s responsibility to review and appoint the external auditors and approve their remuneration and terms of engagement, in 2011 the committee monitored Deloitte’s independence, objectivity and performance with reference to frequent reports from Deloitte during the year covering the overall audit strategy and the progress and results of the audit.

Other work carried out by the committee in 2011 included:

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

• reviewing internal financial control and internal audit activities;

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

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

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

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

57

• reviewing new business models proposed by Group companies;

• reviewing the Group’s Code of Business Conduct and supporting training programs;

• reviewing the Group’s tax strategy and domicile;

• monitoring the accounting and legal reporting requirements, including all relevant regulations of the UK Listing Authority, the SEC and NASDAQ and the Jersey Financial Services Commission with which the Company must comply;

• reviewing the procedures and supporting training programs being implemented by the Group in response to the UK Bribery Act and US Foreign Corrupt Practices Act and increased regulatory focus; and

• reviewing the Group’s reporting systems and back office integration initiatives.

D. Employees

The assets of communications services businesses are primarily their employees, and the Company is highly dependent on the talent, creative abilities and technical skills of its personnel and the relationships its personnel have with clients. The Company believes that its operating companies have established reputations in the industry that attract talented personnel. However, the Company, like all communications services businesses, is vulnerable to adverse consequences from the loss of key employees due to the competition among these businesses for talented personnel. On 31 December 2011, the Group, including all employees of associated undertakings, had approximately 158,000 employees located in over 2,500 offices in 107 countries compared with 146,000 and 138,000 as at 31 December 2010 and 2009, respectively. Excluding all employees of associated undertakings, this figure is 113,615 (2010: 104,052, 2009: 98,759). The average number of employees in 2011 was 109,971 compared to 101,387 and 105,318 in 2010 and 2009, respectively, including acquisitions.

Their geographical distribution was as follows:

	2011	2010	2009
North America	27,540	25,546	25,004
United Kingdom	10,555	9,620	9,704
Western Continental Europe	22,504	21,154	22,230
Asia Pacific, Latin America, Africa and Middle East and Central & Eastern Europe	49,372	45,067	48,380
	109,971	101,387	105,318
Their operating sector distribution was as follows:
	2011	2010	2009
Advertising and Media Investment Management	47,252	42,424	42,906
Consumer Insight	29,204	28,167	28,325
Public Relations & Public Affairs	7,869	7,364	7,325
Branding & Identity, Healthcare and Specialist Communications	25,646	23,432	26,762
	109,971	101,387	105,318

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E. Share Ownership

Directors’ Interests

Directors’ interests in the Company’s ordinary share capital, all of which were beneficial (unless otherwise stated), are shown in the following table. Save as disclosed in this table and in the rest of Item 6, no director had any interest in any contract of significance with the Group during the year. Each executive director has a technical interest as an employee and potential beneficiary in shares in the Company held under the ESOPs. As at 31 December 2011, the Company’s ESOPs (which are entirely independent of the Company and have waived their rights to receive dividends) held in total 20,599,871 shares in the Company (22,083,378 in 2010). Further details of the long-term incentive plans are given in Item 6B.

	At 1 Jan 2011 or appointment date		Shares acquired through long- term incentive plan awards in 2011					Movement during 2011 inc. shares purchased in 2011			At 31 Dec 2011		Shares acquired through long- term incentive plan awards in 2012					Other movements since 31 Dec 2011		At 20 Apr 2012		Shares contributed to charity 2007-2011 (and no  longer beneficially owned)
			Vested		(Sold)								Vested		(Sold)
C Day		15,240		—		—			—			15,240		—		—			—		15,240		—
E Dyson		35,000		—		—			—			35,000		—		—			—		35,000		—
O Gadiesh		—		—		—			—			—		—		—			—		—		—
P Lader		11,950		—		—			—			11,950		—		—			—		11,950		—
R Li		—		—		—			—			—		—		—			—		—		—
S W Morten		20,000		—		—			—			20,000		—		—			—		20,000		—
K Naganuma1		—		—		—			—			—		—		—			—		—		—
L Olayan		—		—		—			10,000			10,000		—		—			—		10,000		—
J A Quelch		12,000		—		—			—			12,000		—		—			—		12,000		—
M Read2		97,126		139,782		(139,782	)		7,605			104,731		38,633		(38,633	)		—		104,731		—
P W G Richardson2,3		494,790		456,926		(415,926	)		—			535,790		154,538		(77,273	)		—		613,055		—
J Rosen		12,000		—		—			—			12,000		—		—			—		12,000		—
T Shriver		10,000		—		—			—			10,000		—		—			—		10,000		—
P Spencer		10,000		—		—			—			10,000		—		—			—		10,000		—
S Trujillo		10,000		—		—			—			10,000		—		—			—		10,000		—
Sir Martin Sorrell2,4,5,6		16,857,601		930,262		—			(264,000	)		17,523,863		386,344		—			—		17,910,207		805,936	7

¹  K Naganuma is a director of Asatsu-DK, which at 20 April 2012 had interests in 31,295,646 shares representing 2.48% of the issued share capital of the Company.

²  Interests include investment shares committed to the 2008, 2009, 2010 and 2011 awards under the LEAP plans but do not include matching shares from these awards, if any.

³  In March 2012, Mr Paul Richardson agreed to charge 15,453 WPP ADRs to Bank of America, N.A. as security for existing bank facilities made available to him. The total number of WPP ADRs charged by Mr Paul Richardson to Bank of America, N.A. after that transaction is 115,611.

⁴  Includes 4,176,833 shares pursuant to the vesting of the 2004 and 2005 awards, part of the 2006 award and the 2007 award granted under LEAP. The receipt of these awards has been deferred until November 2017.

⁵  Includes 3,636,950 shares which originally formed part of the Capital Investment Plan (an award in respect of 4,691,392 shares in total, some of which have been received by Sir Martin Sorrell) and comprised the UK and US Deferred Stock Units Awards Agreements.

⁶  In March 2011, Sir Martin Sorrell gifted 264,000 ordinary shares to the JMMRJ Sorrell Charitable Foundation.

⁷  The JMMRJ Sorrell Charitable Foundation, of which Sir Martin Sorrell is a joint trustee, has an interest of 805,936 WPP plc shares. Sir Martin has no beneficial interest in these shares.

Options held by executive directors

The options held by Mark Read at 31 December 2011 were granted prior to him becoming a director of the Company.

	Grant/ award date		End of exercise period		Exercise price		At 1 Jan 2011 (no. of shares)		Granted/ (lapsed) 2011 (no. of shares)		Exercised 2011 (no. of shares)		Share price on exercise		Value on exercise		At 31 Dec 2011 (no. of shares)		Share price 31  Dec 20111
Mark Read		17.11.2003		17.11.2013	£	5.595		10,615		—		—		—		—		10,615	£	6.755
		29.10.2004		29.10.2014	£	5.535		9,879		—		—		—		—		9,879	£	6.755

¹  Share price 12-month high/low: £8.465/£5.78.

59

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A. Major Shareholders

As of the dates shown below, the Company is aware of the following interests of 3% or more in the issued ordinary share capital of the Company:

			20 April 2012				18 April 2011				16 April 2010
Legal & General	3.55	%		44,960,433	3.78	%		47,884,647	3.99	%		50,154,226
BlackRock Inc.	*			*					5.10	%		64,106,906
AXA S.A.	*			*					4.95	%		62,221,408
Massachusetts Financial Services Company	*			*					4.84	%		60,838,710

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

The disclosed interests refer to the respective combined holdings of those entities and to interests associated with them. The Company has not been notified of any other holdings of ordinary share capital of 3% or more. None of these shareholders has voting rights that are different from those of the holders of the Company’s ordinary shares generally. As far as WPP is aware, it is neither directly nor indirectly owned or controlled by one or more corporations or by any government, or by any other natural or legal persons severally or jointly.

The number of outstanding ordinary shares at 31 December 2011 was 1,266,373,821 which includes the underlying ordinary shares represented by 9,715,724 ADSs. 222 share owners of record of WPP ordinary shares were US residents at 31 December 2011.

The geographic distribution of our share ownership as at 31 December 2011 is presented below:

United Kingdom	36%
United States	35%
Asia Pacific, Latin America, Africa & Middle East, Canada and Continental Europe	29%
Total	100%

B. Related Party Transactions

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

C. Interests of Experts and Counsel

Not applicable.

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ITEM 8. FINANCIAL INFORMATION

A. Consolidated Statements and Other Financial Information

See Item 18.

Outstanding legal proceedings

The Company has claims against others and there are claims against the Company in a variety of matters arising from the conduct of its business. In the opinion of the management of the Company, the ultimate liability, if any, that is likely to result from these matters would not have a material impact on the Company’s financial position, or on the results of its operations.

Dividend distribution policy

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

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

Dividend Access Trust

Following the scheme of arrangement on 19 November 2008, WPP put in place a dividend access plan (the “Dividend Access Plan”) under which share owners may elect to be paid dividends from WPP DAS Limited (a subsidiary of WPP formed in 2008 and resident for tax purposes in the UK) rather than from WPP (a company resident for tax purposes in Ireland). The Dividend Access Plan is primarily designed to ensure that share owners may continue to receive UK dividends, meaning in particular that under the Dividend Access Plan, no Irish tax is required to be withheld from the payment of dividends to share owners. The tax consequences of receiving dividends under the Dividend Access Plan or directly from WPP are described in Item 10E.

Share owners who hold more than 100,000 ordinary shares and who wish to receive their dividend from a United Kingdom source must make an election and should contact Computershare Investor Services (Computershare) for the relevant forms. Share owners who held 100,000 or fewer WPP ordinary shares on the date of admission of the Company’s shares to the London Stock Exchange, or (if later) on the first dividend record date after they became share owners in the Company, will be automatically deemed to have elected to receive a United Kingdom-sourced dividend. All elections remain in force indefinitely unless revoked. Unless share owners have made, or are deemed to have made, an election under the Dividend Access Plan, their dividends will be paid from an Irish source and be taxed accordingly.

In 2009 WPP DAS Limited issued one dividend access share to Computershare, which acts as trustee pursuant to a dividend access trust that has been constituted pursuant to a trust deed. The trust deed provides that:

(a) the dividend access trust will hold any dividends paid (not just declared) on the dividend access share in trust for share owners who have elected (or are deemed to have elected) to receive dividends pursuant to this arrangement; and

(b) each registered share owner on a dividend record date who has made a valid election (or is deemed to have made a valid election) under the Dividend Access Plan will, assuming WPP DAS Limited has sufficient distributable reserves as at the time of the distribution to the trustee, be entitled to receive from the trustee an amount equal to the dividend it would have received from WPP, to the extent that the trustee has actually received an amount by way of dividend from WPP DAS Limited.

To ensure compliance with UK trust law rules, the period during which the dividend access trust may continue is restricted. However, the dividend access trust under current law is able to continue for 80 years.

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Share owners will not have any interest in the dividend access share and will not have any rights against WPP DAS Limited as the issuer of the dividend access share. The only assets held in trust for the benefit of share owners will be dividends paid to the trustee in respect of the dividend access share.

Shortfall in dividend payment

To the extent that dividends paid to the dividend access trust are insufficient to fund an amount equal to the dividend paid on the relevant ordinary shares, any dividend on the dividend access share received by the dividend access trust will be allocated pro rata to the relevant share owners and WPP will pay the balance of the dividend due to those share owners by way of a dividend on the ordinary shares. Any such dividend paid on ordinary shares will have an Irish source and will generally be subject to Irish dividend withholding tax at such rate as may be applicable under Irish law or the exemptions from Irish dividend withholding tax contained in Irish law or any applicable double tax treaty. In such circumstances, there will be no grossing up by WPP nor will WPP DAS Limited or WPP compensate share owners for any adverse consequences including any Irish dividend withholding tax.

Termination

WPP and WPP DAS Limited reserve the right to suspend or terminate the Dividend Access Plan arrangements at any time, in which case, any dividends will be paid directly to all share owners (including share owners who have made or are deemed to have made) an election to participate in the Dividend Access Plan.

ADSs

In accordance with the provisions of the Deposit Agreement by and among WPP, Citibank, N.A., as Depositary, and the holders and beneficial owners of WPP’s ADSs, the Depositary has made an election on behalf of all holders of ADSs to receive dividends from WPP DAS Limited under the Dividend Access Plan. If a holder of ADSs does not wish to receive dividends from WPP DAS Limited under the Dividend Access Plan, the holder must withdraw his or her ordinary shares from the ADS program prior to the dividend record date set by the Depositary and request delivery of the ordinary shares. This will enable the holder to receive dividends from WPP (if necessary, by making an election to that effect).

WPP DAS Limited 2011 financial statements are presented on page F-45.

Scrip Dividend

Following share owner approval at the 2011 Company’s General Meeting, the Board has put in place a Scrip Dividend Scheme which enables share owners to elect to receive new fully paid ordinary shares in the Company instead of cash dividends, this scheme commenced with the second interim dividend for 2010.

The Scrip Dividend Scheme does not extend to ADR holders and any ADR holder wishing to receive New Shares instead of cash dividends would first need to withdraw from the Company’s ADR programme prior to the dividend record date set by the ADR depositary and request delivery of WPP Shares.

The operation of the Scrip Dividend Scheme is always subject to the Directors’ decision to make an offer of New Shares by way of scrip dividend alternative in respect of any particular dividend. Should the directors decide not to offer New Shares in respect of any dividend, cash will be paid instead.

The Scrip Dividend Scheme is governed by, and its terms and conditions are to be construed in accordance with, English law.

B. Significant Changes

None.

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ITEM 9. THE OFFER AND LISTING

A. Offer and Listing Details

Share price history

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

The following table sets forth, for the periods indicated, the reported high and low middle-market quotations for the Company’s ordinary shares on The London Stock Exchange, based on its Daily Official List.

	£ per Ordinary Share
	High		Low
2007		7.88		5.77
2008		6.48		3.10
2009		6.15		3.53
2010
First Quarter		6.83		5.73
Second Quarter		7.40		6.08
Third Quarter		7.30		6.15
Fourth Quarter		7.95		6.97
2011
First Quarter		8.47		7.38
Second Quarter		7.90		7.21
Third Quarter		7.86		5.79
October		6.88		5.78
November		6.74		6.17
December		6.76		6.38
Fourth Quarter		6.88		5.78
2012
January		7.58		6.69
February		8.17		7.61
March		8.80		7.99
First Quarter		8.80		6.69

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

	US dollars per ADS
	High		Low
2007		77.93		59.47
2008		63.19		23.28
2009		49.99		24.54
2010
First Quarter		51.55		44.30
Second Quarter		57.03		44.48
Third Quarter		57.07		46.97
Fourth Quarter		61.97		55.23
2011
First Quarter		68.78		58.74
Second Quarter		65.29		58.95
Third Quarter		62.87		45.40
October		55.38		45.04
November		54.17		47.32
December		52.52		49.01
Fourth Quarter		55.38		45.04
2012
January		59.04		52.14
February		64.64		59.92
March		70.03		62.60
First Quarter		70.03		52.14

The Depositary held 48,578,623 ordinary shares as at 31 December 2011, approximately 3.84% of the outstanding ordinary shares, represented by 9,715,724 outstanding ADSs.

B. Plan of Distribution

Not applicable.

C. Markets

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

D. Selling Shareholders

Not applicable.

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

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ITEM 10. ADDITIONAL INFORMATION

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

WPP is a public limited company incorporated under the name “WPP plc” in Jersey with registered number 101749.

The following summarises certain provisions of our memorandum and articles of association and applicable Jersey law. This summary is qualified in its entirety by reference to the Jersey Companies Law and our memorandum and articles of association. A copy of our memorandum and articles of association in the form adopted by Special Resolution on 30 September 2008 and amended by Special Resolution on 2 June 2011 is filed as an exhibit to this Form 20-F.

Objects and Purposes

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

Rights attaching to WPP ordinary shares

Voting rights of share owners – subject to disenfranchisement in the event of: (A) non-payment of any call or other sum due and payable in respect of any ordinary share; or (B) any non-compliance with any statutory notice requiring disclosure of the beneficial ownership of any ordinary shares and subject to any special rights or restrictions as to voting for the time being attached to any ordinary shares (as to which there are none at present), on a show of hands every qualifying person (i.e. share owner, proxy or authorised corporate representative) present has one vote and on a poll every share owner present in person or by proxy has one vote for every ordinary share of which he or she is a holder, except that any proxy who has been appointed by the Depositary shall have such number of votes as equals the number of ordinary shares in relation to which such proxy has been appointed. In the case of joint holders, the vote of the person whose name stands first in the register of members and who tenders a vote is accepted to the exclusion of any votes tendered by any other joint holders.

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

Capitalisation of reserves

The board of directors may, with the authority of an ordinary resolution of WPP: (A) resolve to capitalise any sum standing to the credit of any reserve account of WPP (including share premium account and capital redemption reserve) or any sum standing to the credit of profit and loss account not required for the payment of any preferential dividend (whether or not it is available for distribution); and (B) appropriate that sum as capital to the share owners in proportion to the nominal amount of the ordinary shares held by them respectively and apply that sum on their behalf in paying up in full any unissued ordinary shares or debentures of WPP of a nominal amount equal to that sum and allot the ordinary shares or debentures credited as fully paid to those share

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owners, or as they may direct, in those proportions or in paying up the whole or part of any amounts that are unpaid in respect of any issued ordinary shares held by them respectively, or otherwise deal with such sum as directed by the resolution, provided that the share premium account and the capital redemption reserve and any sum not available for distribution in accordance with the Statutes may only be applied in paying up unissued ordinary shares to be allotted credited as fully paid up.

Transfer of ordinary shares

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

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

Changes in capital

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

• increase its share capital;

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

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

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

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

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

• purchase ordinary shares, including any redeemable ordinary shares; and

• reduce its share capital and any capital redemption reserve or share premium account.

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Authority to allot securities and disapplication of pre-emption rights

WPP may from time to time pass an ordinary resolution authorising the board of directors to exercise all the powers of WPP to allot relevant securities up to the nominal amount specified in the resolution. The authority shall expire on the day specified in the resolution, not being more than five years after the date on which the resolution is passed.

On the passing of a special resolution, the board of directors shall have power to allot equity securities for cash but that power shall be limited: (A) to the allotment of equity securities in connection with a rights issue; and (B) to the allotment (other than in connection with a rights issue) of equity securities having a nominal amount not exceeding in aggregate the sum specified in the special resolution (i.e. the articles of association do not contain any pre-emption rights).

Variation of rights

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

Disclosure of interests in ordinary shares

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

• interested in the ordinary shares; or

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

The disclosure notice may require the person:

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

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

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

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

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

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

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

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

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

Register of members

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

Uncertificated ordinary shares – general powers

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

Directors

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

A director need not be a share owner.

There is no age limit for directors.

At each Annual General Meeting every director shall retire from office. A retiring director shall be eligible for re-election and a director who is re-elected will be treated as continuing in office without a break.

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

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

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

The board of directors may exercise all the powers of WPP to pay, provide or procure the grant of pensions or other retirement or superannuation benefits and death, disability or other benefits, allowances or gratuities to any person who is or has been at any time a director or in the employment or service of WPP or of any company that

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is or was a subsidiary of or associated with WPP or of the predecessors in business of WPP or any subsidiary or associated company or the relatives or dependants of any such person. For that purpose, the board of directors may procure the establishment and maintenance of, or participate in, or contribute to any non-contributory or contributory pension or superannuation fund, scheme or arrangement or pay any insurance premiums.

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

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

Board meetings and committee meetings shall not take place in the United Kingdom and no director may participate in any meeting if he is physically present in the United Kingdom at any time during the meeting. Any decision reached or resolution passed by the directors at any meeting that is held in the United Kingdom or any meeting in respect of which any director participating in the meeting is physically present in the United Kingdom during the meeting shall be invalid and of no effect. The place of the board meeting shall be deemed to be at the place at which the chairman of the meeting is physically present.

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

A director shall not vote (or be counted in the quorum at a meeting) in respect of any transaction or arrangement or other proposal in which he has an interest that (together with any interest of a connected person) is to his knowledge a direct or indirect interest and as may reasonably be required as likely to give rise to a conflict. Notwithstanding the above, a director shall be entitled to vote (and be counted in the quorum) on: (A) any transaction or arrangement in which he is interested by virtue of an interest in ordinary shares, debentures or other securities of WPP or otherwise in or through WPP; (B) the giving of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of, or for the benefit of, WPP or any of its subsidiaries; or a debt or obligation of WPP or any of its subsidiaries for which he himself has assumed responsibility under a guarantee or indemnity or by the giving of security; (C) (subject to the Statutes) indemnification (including loans made in connection with it) by WPP in relation to the performance of his duties on behalf of WPP or any of its subsidiaries; (D) any issue or offer of ordinary shares, debentures or other securities of WPP or any of its subsidiaries in respect of which he is or may be entitled to participate in his capacity as holder of any such securities or as an underwriter or sub-underwriter; (E) any transaction or arrangement concerning another company in which he and any connected person do not to his knowledge hold, directly or indirectly as shareholders, or through their direct or indirect holdings of financial instruments (within the meaning of Chapter 5 of the Disclosure and Transparency Rules) voting rights representing one percent or

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more of any class of ordinary shares in the capital of such company; (F) any arrangement for the benefit of employees of WPP or any of its subsidiaries that does not accord to him any privilege or benefit not generally accorded to the employees to whom the arrangement relates; and (G) the purchase or maintenance of insurance for the benefit of the directors or for the benefit of persons including the directors. “Disclosure and Transparency Rules” means the rules and regulations made by the Financial Services Authority in its capacity as the UK Listing Authority under Part VI of the UK Financial Services and Markets Act of 2000, as amended, and contained in the UK Listing Authority’s publication of the same name.

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

General meetings

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

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

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

Borrowing powers

The board of directors may exercise all the powers of WPP to borrow money and to mortgage or charge all or any part of its undertaking, property and assets (both present and future) and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligations of WPP or of any third party. The board of directors shall restrict the borrowings of WPP and exercise all voting and other rights or powers of control exercisable by WPP in relation to its subsidiaries (if any) so as to secure (as regards subsidiaries only so far as by such exercise it can secure) that the aggregate principal amount outstanding at any time in respect of all borrowings by the WPP Group (exclusive of any borrowings that are owed by one WPP Group company to another WPP Group company) after deducting the amount of cash deposited will not, without the previous sanction of WPP in general meeting, exceed an amount equal to 2.5 times the adjusted capital and reserves (as defined in the articles of association) or any higher limit fixed by ordinary resolution of WPP that is applicable at the relevant time. “WPP Group” means WPP and its subsidiaries, subsidiary undertakings and associated undertakings.

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

Dividends

Declaration of dividends – subject to the provisions of the Jersey Companies Law, WPP may, by ordinary resolution, declare a dividend to be paid to the share owners, according to their respective rights and interests in the profits, and may fix the time for payment of such dividend, but no dividend shall exceed the amount recommended by the board of directors.

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

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Calculation and currency of dividends – except insofar as the rights attaching to, or the terms of issue of, any shares otherwise provide: (A) all dividends shall be declared and paid according to the amounts paid up on the ordinary shares in respect of which the dividend is paid, but no amount paid up on an ordinary share in advance of calls shall be treated as paid up on the ordinary share; (B) all dividends shall be apportioned and paid pro rata according to the amounts paid up on the ordinary shares during any portion or portions of the period in respect of which the dividend is paid; (C) any amount paid by WPP by way of dividend will be deemed to include any amount that WPP may be compelled by law to withhold or deduct; and (D) dividends may be declared or paid in any currency. The board of directors may agree with any share owner that dividends that may at any time or from time to time be declared or become due on his ordinary shares in one currency shall be paid or satisfied in another, and may agree the basis of conversion to be applied and how and when the amount to be paid in the other currency shall be calculated and paid and for WPP or any other person to bear any costs involved.

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

Calls or debts or amounts required by law may be deducted from dividends – the board of directors may deduct from any dividend or other moneys payable to any person (either alone or jointly with another) on or in respect of an ordinary share all such sums as may be due from him (either alone or jointly with another) to WPP on account of calls or otherwise in relation to ordinary shares.

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

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

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

Forfeiture of ordinary shares

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

The written notice shall state a further day, being not less than 14 clear days from the date of the notice, on or before which, and the place where, payment is to be made and shall state that, in the event of non-payment on or before the day and at the place appointed, the ordinary share in respect of which the call was made or installment is payable will be liable to be forfeited.

If the requirements of a notice are not complied with, any ordinary share in respect of which it was given may (before the payment required by the notice is made) be forfeited by a resolution of the board of directors. The forfeiture shall include all dividends declared and other moneys payable in respect of the forfeited ordinary share and not actually paid before the forfeiture.

Every ordinary share that is forfeited or surrendered shall become the property of WPP and (subject to the Statutes) may be sold, re-allotted or otherwise disposed of, upon such terms and in such manner as the board of directors shall decide either to the person who was before the forfeiture the share owner or to any other person and whether with or without all or any part of the amount previously paid up on the ordinary share being credited as so paid up.

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Website communication with share owners

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

Directors’ indemnity, insurance and defence

As far as the legislation allows, WPP may:

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

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

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

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

C. Material Contracts

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

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

(ii) on 23 June 2004, WPP Finance (UK) issued US$650,000,000 of 5.875% notes due 2014 pursuant to the Indenture and the First Supplemental Indenture both dated as at 23 June 2004 among WPP Finance (UK), as Issuer, WPP 2005 Limited, as guarantor and Citibank N.A., as Trustee, as supplemented by the First Supplemental Indenture dated as at 23 June 2004 among WPP Finance (UK), as Issuer, WPP 2005 Limited, as Guarantor and Citibank N.A., as Trustee. The Notes were fully and unconditionally guaranteed by WPP 2008 Limited pursuant to the Second Supplemental Indenture dated 27 June 2006 and by WPP Young & Rubicam US Holdings (a subsidiary of WPP) pursuant to the Third Supplemental Indenture dated 19 December 2006. The Notes were fully and unconditionally guaranteed by WPP and WPP Air 1 Limited (a subsidiary of WPP) pursuant to the Fourth Supplemental Indenture dated 7 October 2008 and the Fifth Supplemental Indenture dated 30 April

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2009. The Indenture contains events of default provisions (including a cross-default provision). It also contains a restriction on the Issuer or any of the guarantors referred to above consolidating or merging with any other person and conveying, transferring or leasing all or substantially all of their properties and assets to any person except where the entity resulting from such consolidation or merger or to whom such properties and assets are transferred becomes a primary obligor of the Notes and gives certain certificates and indemnities. The covenants of the Indenture also contain a negative pledge and a limitation on the sale and leaseback of any assets by the guarantors referred to above and their principal subsidiaries. The Indenture allows for defeasance of these covenants subject to certain conditions. The Indenture also contains a joint and several indemnity from the Issuer and the guarantors referred to above in favour of the Trustee. On 2 December 2011, holders exchanged US$281,369,000 of the foregoing notes for $312,387,000 principal amount of 4.75% guaranteed senior notes due November 2021 issued by WPP Finance 2010 and guaranteed by WPP plc, WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited. The outstanding principal of the 5.875% notes due 2014 is therefore now US$368,631,000;

(iii) on 5 December 2006, WPP 2008 Limited issued EUR 600,000,000 4.375% guaranteed bonds due 2013. The bonds are guaranteed by WPP 2005 Limited and were constituted by a Trust Deed dated 5 December 2006 between Citicorp Trustee Company Limited, the guarantor and WPP 2008 Limited. The administration of payments to bondholders is provided for in a Paying Agency Agreement dated 5 December 2006 between WPP 2008 Limited, Citibank, N.A., London Branch and others. The bonds are listed on the London Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and the events of default provisions in the terms and conditions contain a cross-default provision. The Trust Deed also contains an indemnity by WPP 2008 Limited in favour of Citicorp Trustee Company Limited. Pursuant to a supplemental trust deed dated 14 November 2008, WPP, WPP Air 1 Limited and WPP Air 3 Limited acceded as additional guarantors to the bonds;

(iv) on 4 April 2007, WPP 2008 Limited issued £400,000,000 6.0% guaranteed bonds due 2017. The bonds are guaranteed by WPP 2005 Limited and were constituted by a Trust Deed dated 4 April 2007 between Citicorp Trustee Company Limited, the guarantor and WPP 2008 Limited. The bonds are listed on the London Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and events of default provisions (including a cross-default provision). The Trust Deed also contains an indemnity by WPP 2008 Limited in favour of Citicorp Trustee Company Limited. Pursuant to a supplemental trust deed dated 14 November 2008, WPP, WPP Air 1 Limited and WPP Air 3 Limited acceded as additional guarantors to the bonds;

(v) On 6 November 2007, WPP Finance S.A. issued EUR 500,000,000 5.25% guaranteed bonds due 2015 and £200,000,000 6.375% guaranteed bonds due 2020. Both tranches of bonds are guaranteed by WPP 2005 Limited and WPP 2008 Limited and were constituted respectively by two Trust Deeds dated 6 November 2007 between Citicorp Trustee Company Limited, the guarantors and WPP Finance S.A. The bonds are listed on the London Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and events of default provisions (including a cross-default provision). The Trust Deeds also contain indemnities by WPP Finance S.A. in favour of Citicorp Trustee Company Limited. Pursuant to a supplemental trust deed dated 14 November 2008, WPP, WPP Air 1 Limited and WPP Air 3 Limited acceded as additional guarantors to the bonds;

(vi) On 12 May 2008, WPP 2008 Limited issued EUR 750,000,000 6.625% guaranteed bonds due 2016. The bonds are guaranteed by WPP 2005 Limited and were constituted by a Trust Deed dated 12 May 2008 between Citicorp Trustee Company Limited, the guarantor and WPP 2008 Limited. The bonds are listed on the London Stock Exchange and the terms and conditions contain a redemption provision at the option of the bondholders on a Change of Control, a negative pledge provision and events of default provisions (including a cross-default provision). The Trust Deed also contains an

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indemnity by WPP 2008 Limited in favour of Citicorp Trustee Company Limited. Pursuant to a supplemental trust deed dated 14 November 2008, WPP, WPP Air 1 Limited and WPP Air 3 Limited acceded as additional guarantors to the bonds;

(vii) effective 19 November 2008, WPP entered into a deposit agreement with Citibank, N.A., as Depositary, and the holders and beneficial owners of ADSs that sets out the terms on which the Depositary has agreed to act as depositary with respect to the WPP ADSs issued in exchange for WPP 2008 Limited ADSs following effectiveness of the Scheme. The deposit agreement contains, amongst other things, customary provisions pertaining to the form of ADR certificates, the deposit and withdrawal of ordinary shares, distributions to holders of ADSs, voting of ordinary shares underlying ADSs, obligations of the Depositary and WPP, charges of the Depositary, and compliance with applicable law;

(viii) On 19 May 2009, WPP plc issued £450,000,000 of 5.75% guaranteed convertible bonds due 2014. The bonds are guaranteed by WPP 2008 Limited, WPP 2005 Limited, WPP Air 1 Limited and WPP Air 3 Limited and were constituted by a trust deed dated May 19, 2009. The bonds are listed on the London Stock Exchange and the terms and conditions contain a conversion provision allowing bondholders to convert their bonds into ordinary shares of WPP plc within a specified period. The bonds contain a conversion option upon a Change of Control, a negative pledge and events of default provisions (including a cross default provision). The trust deed contains an indemnity in favour of Citicorp Trustee Company Limited;

(ix) On 10 June 2009, WPP Finance (UK) issued US$600,000,000 of 8% guaranteed senior notes due 2014 pursuant to the Indenture and the First Supplemental Indenture both dated as at 10 June 2009 among WPP Finance (UK), as Issuer, WPP plc, WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as Guarantors, and Wilmington Trust Company, as Trustee. The Indenture contains events of default provisions (including a cross-default provision). It also contains a restriction on the Issuer or any of the Guarantors referred to above consolidating or merging with any other person and conveying, transferring or leasing all or substantially all of their properties and assets to any person except where the entity resulting from such consolidation or merger or to whom such properties and assets are transferred becomes a primary obligor of the notes and gives certain certificates and indemnities. The covenants of the Indenture also contain a negative pledge and a limitation on the sale and leaseback of any assets by the Guarantors referred to above and their principal subsidiaries. The Indenture allows for defeasance of these covenants subject to certain conditions. The holders of the notes have the right to require the Issuer to repurchase the notes at a price equal to 101% of the principal amount of the notes in the event that there is a Change of Control of WPP plc and the notes lose their investment grade rating. The Indenture also contains a joint and several indemnity from the Issuer and the Guarantors referred to above in favour of the Trustee;

(x) On 2 November 2011, WPP Finance 2010 issued US$500,000,000 of 4.75% guaranteed senior notes due November 2021. In December 2011 WPP Finance 2010 issued an additional $312,387,000 of 4.75% guaranteed senior notes due November 2021 in exchange for $281,369,000 of outstanding 5.875% Senior Notes due 2014 of WPP Finance (UK). In total, WPP Finance 2010 issued US$812,387,000 of the 4.75% guaranteed senior notes due November 2021 pursuant to the Indenture and the First Supplemental Indenture, both dated as at 2 November 2011, among WPP Finance 2010 as Issuer, WPP plc, WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as Guarantors, and Wilmington Trust Company, as Trustee. Aside from the coupon and repayment date, the terms and conditions of the notes are the same as those for the $600,000,000 8% notes due September 2014 described above;

(xi) On 30 November 2011, WPP CP Finance PLC, WPP Finance Co. Limited and WPP Group Canada Finance, Inc., as borrowers, entered into an agreement for a five year multi-currency revolving credit facility (with a US Dollar swingline option) of US$1,050,000,000 and £375,000,000 with a syndicate of banks and Citibank International plc as facility agent. The facility is guaranteed by WPP plc, WPP 2008 Limited, WPP 2005 Limited, WPP Air 1 Limited and WPP CP Finance PLC. The

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facility is available for drawing by way of multi-currency cash advances on a revolving basis, with an option to draw US Dollar swingline advances up to a sub-limit of US$825,000,000. The initial margin over LIBOR for the facility is 0.85%. It will be 0.55% per annum if WPP’s rating by Standard and Poor’s and Moody’s Investor Service is A-/A3 or higher, 0.65% if the ratings are BBB+/Baa1, 0.75% if the ratings are BBB/Baa2, 0.95% if the ratings are BBB-/Baa3 and 1.25% if the ratings are BB+/Ba1 or lower. The commitment fee payable on undrawn commitments is equal to 35% of the then applicable margin and a utilisation fee is payable at the rate of 0.20% on the outstanding drawings under the facility if the outstandings exceed 33% of the facility but are less than 66% and at the rate of 0.40% if the outstandings exceed 66%. The interest rate for swingline advances is the higher of the US prime commercial lending rate and 0.50% per annum above the federal funds rate.

D. Exchange Controls

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

E. Taxation

The taxation discussion set forth below is intended only as a descriptive summary and does not purport to be a complete technical analysis or listing of all potential tax effects relevant to a decision to purchase, hold or in any way transfer ordinary shares or ADSs. Each investor should seek advice based on their individual particular circumstances from an independent tax adviser.

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

WPP continues to operate the Dividend Access Plan which allows share owners who have elected (or, by virtue of holding 100,000 or fewer shares, are deemed to have elected) to participate in the plan to receive cash dividends from a UK source without being subject to any Irish or UK withholding taxes. Following share owner approval at the Company’s Annual General Meeting, the Board has put in place a Scrip Dividend Scheme which enables share owners to elect to receive new fully paid ordinary shares in WPP instead of cash dividends, this scheme commenced with the second interim dividend for 2010.

The Scrip Dividend Scheme Circular and the rules of the Dividend Access Plan are available to view on WPP’s website www.wpp.com. This Annual Report on Form 20-F does not incorporate by reference information on the Company’s website.

Republic of Ireland, United Kingdom, Jersey and the United States taxation

General

The paragraphs set out below summarise the Irish tax treatment for share owners (or holders of ADSs) of holding or disposing of ordinary shares (or ADSs). They are based on current Irish legislation and an understanding of current Republic of Ireland Revenue Commissioners’ practice as at the date of this document.

Tax on chargeable gains

Liability for Irish tax on chargeable (taxable) gains will depend on the individual circumstances of share owners.

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Disposal of ordinary shares

Share owners who are not resident or, in the case of individuals, ordinarily resident for tax purposes in the Republic of Ireland will not be liable for Irish tax on chargeable gains realised on a subsequent disposal of their ordinary shares unless in the case of non-corporate shareholders such ordinary shares are used, held or acquired for the purposes of a trade, profession or vocation carried on in the Republic of Ireland through a branch or agency. Such share owners may be subject to foreign taxation on any gain under local law.

A WPP share owner who is an individual and who is temporarily a non-resident of the Republic of Ireland at the time of the disposal may, under anti-avoidance legislation, still be liable to Irish taxation on any chargeable gain realised (subject to the availability of exemptions or reliefs).

A disposal or deemed disposal of shares by a share owner who is resident or ordinarily resident in the Republic of Ireland may, depending on individual circumstances (including the availability of exemptions and allowable losses), give rise to a chargeable gain or allowable loss for the purposes of Irish capital gains tax. The current rate of capital gains tax in the Republic of Ireland is 25%.

The share register of WPP is held in Jersey and, accordingly, individual share owners who are resident, or ordinarily resident in the Republic of Ireland, but not domiciled in the Republic of Ireland, will be liable to Irish capital gains tax only to the extent that the proceeds of a disposal of shares are remitted or deemed to be remitted to the Republic of Ireland.

Irish resident corporate share owners will be liable to Irish capital gains tax irrespective of whether the proceeds of the disposal of the Shares are remitted or deemed to be remitted to the Republic of Ireland.

Dividend withholding tax

Dividends received from WPP plc

Unless a share owner makes, or is deemed to have made, an election to receive dividends from WPP DAS Limited, a company incorporated in the UK, via the Dividend Access Plan, any dividends received will be received from WPP.

Dividends paid by WPP will generally be subject to Irish dividend withholding tax (DWT) at the standard rate of income tax (currently 20%) unless the share owner is within one of the categories of exempt shareholders referred to below. Where DWT applies, WPP will be responsible for withholding DWT at source. For DWT purposes, a dividend includes any distribution made by WPP to share owners, including cash dividends, non-cash dividends and additional shares taken in lieu of a cash dividend.

Where a share owner opts to take additional fully paid new shares instead of a cash dividend under the Scrip Dividend Scheme, the share owner will be treated as if he had received a distribution of an amount equal to the cash dividend which would have been received if he had not elected to take the new shares. In such circumstances, WPP, when issuing the new shares to each share owner (other than a share owner exempted from DWT and who has complied in advance with the relevant procedural requirements, referred to below), will issue a reduced number of shares equal in value to the net amount of the distribution after deducting DWT tax (which currently applies at the rate of 20%.). WPP will then pay to the Irish Revenue an amount of DWT equal to the amount of DWT which would have been payable had he or she elected to take cash instead of new shares.

DWT is not payable where an exemption applies provided that WPP has received all necessary documentation required by the relevant legislation from a WPP Share Owner prior to payment of the dividend.

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Certain categories of Irish resident share owners are entitled to an exemption from DWT, including in general (but not limited to) Irish resident companies, qualifying employee share ownership trusts, charities and pension funds. Except in very limited circumstances, distributions by WPP to an Irish-resident share owner who is an individual are not exempt from DWT.

Certain non-Irish resident share owners (both individual and corporate) are also entitled to an exemption from DWT. In particular, a non-Irish resident share owner is not subject to DWT on dividends received from WPP if the WPP Share Owner is:

• an individual share owner who by virtue of the laws of the relevant country is resident for tax purposes in either a Member State of the European Union (apart from the Republic of Ireland) or in a country with which the Republic of Ireland has a double tax treaty (including the United States), and the individual is neither resident nor ordinarily resident in the Republic of Ireland; or

• a corporate share owner that is not resident for tax purposes in the Republic of Ireland and which is ultimately controlled, directly or indirectly, by persons who by virtue of the laws of the relevant country are resident in either a member state of the European Union (apart from the Republic of Ireland) or in a country with which the Republic of Ireland has a double tax treaty (including the United States); or

• a corporate share owner that is not resident for tax purposes in the Republic of Ireland nor ultimately controlled by persons so resident and which is resident for tax purposes in either a member state of the European Union (apart from the Republic of Ireland) or a country with which the Republic of Ireland has a double tax treaty (including the United States); or

• a corporate share owner that is not resident for tax purposes in the Republic of Ireland and whose principal class of shares (or those of its 75% parent) is substantially and regularly traded on a recognised stock exchange in (i) the Republic of Ireland; (ii) a member state of the European Union (apart from the Republic of Ireland); (iii) a country with which the Republic of Ireland has a double tax treaty (including the United States); or (iv) an exchange approved by the Irish Minister for Finance; or

• a corporate share owner that is not resident for tax purposes in the Republic of Ireland and is wholly owned, directly or indirectly, by two or more companies the principal class of shares of each of which is substantially and regularly traded on a recognised stock exchange in (i) the Republic of Ireland; (ii) a member state of the European Union (apart from the Republic of Ireland); (iii) a country with which the Republic of Ireland has a double tax treaty (including the United States); or (iv) an exchange approved by the Irish Minister for Finance, and provided that, in all cases noted above, the share owner has made the appropriate declaration to WPP prior to payment of the dividend.

Taxation of dividends

Non-Irish resident share owners are, unless entitled to exemption from DWT, liable to Irish income tax on dividends received from WPP. However, the DWT deducted by WPP discharges such liability to Irish income tax. Where a non-resident share owner is entitled to exemption from DWT, then no Irish income tax arises and, where DWT has been deducted by WPP, a claim may be made for a refund of the DWT.

An Irish resident or ordinarily resident share owner, who elects to participate in the Scrip Dividend Scheme will be subject to Irish income tax on the gross cash value (before deduction of applicable DWT) of the distribution to which the share owner is entitled at their marginal rate and, in certain circumstances PRSI (pay related social insurance) and/or the universal social charge. Irish resident individual share owners are generally entitled to credit for DWT deducted against their income tax liability and to have refunded to them any amount by which DWT exceeds such income tax liability.

An Irish resident corporate share owner will generally be exempt from Irish tax in respect of new shares received as a result of participating in the Scrip Dividend Scheme. If an Irish resident corporate share owner is a close company for tax purposes, however, it may, in certain circumstances, be liable to a 20% investment income surcharge in respect of dividends received from WPP.

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Non-Irish resident share owners are, unless entitled to exemption from DWT, liable to Irish income tax on distributions (which would include new shares received as a result of participating in a scrip dividend scheme) received from WPP. However, DWT deducted by the Company discharges such liability to Irish income tax. Where a non-resident share owner is entitled to exemption from DWT, then no Irish income tax arises and, where DWT has been deducted by WPP, a claim may be made for a refund of the DWT.

Non-Irish resident share owners, whether individuals or corporate share owners, may be subject to foreign taxation on dividends received under the local law of the jurisdiction of their residence.

Stamp duty

No Irish stamp duty or capital duty will arise on the issue or transfer for cash of ordinary shares provided such transactions do not relate to Irish stocks or securities of an Irish registered company.

United Kingdom taxation

Cash Dividends

Cash dividends received from WPP plc or from WPP DAS Limited via the Dividend Access Plan, by individual share owners resident in the UK will generally be subject to UK income tax on the gross amount of any dividends paid by WPP before deduction of DWT (if any) with a tax credit equal to one-ninth of the dividend received; tax credits are not repayable to UK holders with no tax liability. Individuals whose income is within the lower or basic tax rate bands are liable to tax at 10% on the dividend income and the tax credit will satisfy their income tax liability on UK dividends. For higher tax rate payers the rate of tax on dividend income for dividends received on or after 6 April 2010 is either 32.5% or 42.5% for individuals with income of £150,000 or more, with relief available for the tax credit referred to above. The gross amount of the cash dividend will be regarded as the top slice of the WPP share owner’s income and will be subject to UK income tax as set out above. Share owners within the charge to UK corporation tax will not generally be subject to UK corporation tax on receipt of a cash dividend from the Company or, in the case of the Dividend Access Plan, from WPP DAS Limited.

Dividends paid by WPP plc will generally be subject to DWT at the standard rate of income tax (currently 20%) unless the share owner is within one of the categories of exempt share holders as provided in Irish law or by virtue of a relevant tax treaty. UK resident WPP share owners may be able to apply for an exemption from withholding taxes under Irish domestic law or the UK-Ireland double tax treaty. DWT is not payable where an exemption applies provided that WPP plc has received all necessary documentation required by the relevant legislation from a WPP share owner prior to the payment of the dividend. Share owners are advised to consult their professional advisors on this point. Where a non-Irish resident share owner is entitled to exemption from DWT but DWT has to be deducted from the dividend by WPP, a claim may be made for a refund of the DWT to the Irish tax authorities. Her Majesty’s Revenue & Customs will generally give credit (such credit being limited to the UK-Ireland double tax treaty rate) for any Irish DWT withheld from the payment of a dividend (if any) and not recoverable from the Irish tax authorities against the UK income tax payable in respect of the gross amount of the dividend. If a share owner makes, or is deemed to have made, an election to receive dividends via the Dividend Access Plan, such share owner will receive dividends directly from WPP DAS Limited (unless there is a shortfall in the Dividend Access Trust, in which case some or all of the dividend will be received from WPP). WPP DAS Limited is not required to withhold at source any amount in respect of UK tax from dividend payments it makes under the Dividend Access Plan regardless of who the recipient of the payment is. The Dividend Access Plan is described further in Item 8.

Scrip Dividend Scheme

In the absence of any Irish dividend withholding tax (DWT) being levied on issues of new shares under the Scrip Dividend Scheme, individual share owners should not be liable to UK income tax on receipt of the new shares and share owners within the charge to UK corporation tax should not be subject to UK corporation tax on receipt of the new shares. For the purposes of UK taxation of chargeable gains, the new shares will be treated as being

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the same asset as the existing holding of shares (the Original Holding) in respect of which the Scrip Dividend Mandate Form was made and as having been acquired when the Original Holding was acquired (together, the New Holding). The New Holding will have the same base cost for chargeable gains purposes as the Original Holding. On a subsequent disposal of any of the new shares, share owners may (depending upon their individual circumstances, which may include the availability of exemptions or reliefs) be subject to UK capital gains tax or UK corporation tax on chargeable gains.

If however DWT is levied on the issue of new shares under the Scrip Dividend Scheme, share owners will receive new shares net of any such withholding (the net amount). The difference between the net amount and the amount of new shares that would have been received by a share owner under the Scrip Dividend Scheme in the absence of that DWT is likely to be treated in the same way as a cash dividend paid by the Company and certain share owners may, subject to the completion of certain procedural formalities, be entitled to reclaim some or all of the DWT or be entitled to relief at source in respect thereof.

Jersey taxation

General

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

Income Tax

Holders of ordinary shares

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

WPP will be entitled to issue new shares under the Scrip Dividend Scheme without any withholding or deduction for or on account of Jersey income tax. Share owners (other than residents of Jersey) will not be subject to tax in Jersey in respect of the receipt, holding, sale or other disposition of new shares.

Holders of ADSs

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

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

Stamp duty

No stamp duty is payable in Jersey on the issue orinter vivos transfer of ordinary shares or ADSs.

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Upon the death of a share owner, a grant of probate or letters of administration will be required to transfer the ordinary shares of the deceased person, except that where the deceased person was domiciled outside of Jersey at the time of death, WPP may (at its discretion) dispense with this requirement where the value of the deceased’s movable estate in Jersey does not exceed £10,000.

Upon the death of a share owner, Jersey stamp duty will be payable on the registration in Jersey of a grant of probate or letters of administration, which will be required in order to transfer or otherwise deal with:

(a) (where the deceased person was domiciled in Jersey at the time of death) the deceased person’s personal estate wherever situated (including any ordinary shares) if the net value of such personal estate exceeds £10,000; or

(b) (where the deceased person was domiciled outside of Jersey at the time of death) the deceased person’s personal estate situated in Jersey (including any ordinary shares) if the net value of such personal estate exceeds £10,000.

The rate of stamp duty payable is:

(i) (where the net value of the deceased person’s relevant personal estate does not exceed £100,000) 0.50 percent of the net value of the deceased person’s relevant personal estate; or

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

In addition, application and other fees may be payable.

US federal income taxation

Introduction

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

The following is a summary of certain material US federal income tax consequences of the acquisition, ownership and disposition of ordinary shares or ADSs by a US Holder (as defined below). The discussion does not cover all aspects of US federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of ordinary shares or ADSs by particular investors and does not address state, local, foreign or other tax laws. In particular, this summary does not address all of the tax considerations that may be relevant to investors subject to special treatment under the US federal income tax laws (such as financial institutions, insurance companies, investors liable for the alternative minimum tax, investors that own (directly or indirectly) 10% or more of the voting stock of WPP, investors that hold ordinary shares or ADSs through a permanent establishment, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations, dealers in securities or currencies, traders that elect to mark to market, investors that will hold the ordinary shares or ADSs as part of straddles, hedging transactions or conversion transactions for US federal income tax purposes or investors whose functional currency is not the US dollar).

This summary deals only with US Holders (as defined below) who elect or are deemed to elect (because they have not withdrawn their ordinary shares from the ADS programme prior to the dividend record date set by the US Depositary) to participate in the Dividend Access Plan.

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

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

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

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

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

Classification of the ADSs

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

Tax on Dividends

Distributions paid by WPP or WPP DAS Limited out of current or accumulated earnings and profits (as determined for US federal income tax purposes) will generally be taxable to a US Holder as foreign source dividend income, and will not be eligible for the dividends received deduction generally allowed to US corporations.

A US Holder of ADSs generally will include dividends in gross income in the taxable year in which such holder actually receives the dividend. US Holders that surrender their ADSs in exchange for the underlying ordinary shares should consult their tax advisers regarding the proper timing for including dividends in gross income.

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

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For taxable years that begin before 2013, dividends paid by WPP or WPP DAS Limited will be taxable to a non-corporate US Holder as “qualified dividend income” at the special reduced rate normally applicable to capital gains, provided WPP qualifies for the benefits of the income tax treaty between the United States and the Republic of Ireland (the “Treaty”), which WPP believes to be the case. However, there can be no assurance that WPP will qualify for the benefits of the Treaty going forward. A US Holder will be eligible for this reduced rate only if it has held the ordinary shares or ADSs for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date.

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

Sale or other disposition

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

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

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

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

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

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Backup withholding and information reporting

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

F. Dividends and Paying Agents

Not applicable.

G. Statements by Experts

Not applicable.

H. Documents on Display

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

I. Subsidiary Information

Not applicable.

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ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s principal market risks are changes in interest rates and currency exchange rates. Following evaluation of these positions, the Company selectively enters into derivative financial instruments to manage its risk exposure. The fair value of derivatives held by the Company at 31 December 2011 is estimated to be a net asset of £45.5 million (£121.0 million net asset with respect to interest rate swaps and £75.5 million net liability for currency derivatives). These amounts are based on market values of equivalent instruments at the balance sheet date.

Interest rate and foreign currency risks

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

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

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

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

Credit risk

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

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A. Debt Securities

Not applicable.

B. Warrants and Rights

Not applicable.

C. Other Securities

Not applicable.

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D. American Depositary Shares

Fees and Charges

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

Service	Rate	By Whom Paid
(1)    Issuance of ADSs upon deposit of ordinary shares (excluding issuances as a result of distributions described in paragraph (4) below).	Up to U.S.$5.00 per 100 ADSs (or fraction thereof) issued.	Person depositing ordinary shares or person receiving ADSs.
(2)    Delivery of deposited securities against surrender of ADSs.	Up to U.S.$5.00 per 100 ADSs (or fraction thereof) surrendered.	Person surrendering ADSs for purpose of withdrawal of deposited securities or person to whom deposited securities are delivered.
(3)    Distribution of cash dividends or other cash distributions (i.e., sale of rights and other entitlements).	Up to U.S.$2.00 per 100 ADSs (or fraction thereof) held, unless prohibited by the exchange upon which the ADSs are listed.	Person to whom distribution is made.
(4)    Distribution of ADSs pursuant to (i) stock dividends or other free stock distributions, or (ii) exercise of rights to purchase additional ADSs.	Up to U.S.$5.00 per 100 ADSs (or fraction thereof) issued, unless prohibited by the exchange upon which the ADSs are listed.	Person to whom distribution is made.
(5)    Distribution of securities other than ADSs or rights to purchase additional ADSs (i.e., spin-off shares).	Up to U.S.$5.00 per unit of 100 securities (or fraction thereof) distributed.	Person to whom distribution is made.
(6)    Depositary Services.	Up to U.S.$2.00 per 100 ADSs (or fraction thereof) held as of the last day of each calendar year, except to the extent of any cash dividend fee(s) charged under paragraph (3) above during the applicable calendar year.	Person of record on last day of any calendar year.
(7)    Transfer of ADRs.	U.S.$1.50 per certificate presented for transfer.	Person presenting certificate for transfer.

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

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

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

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

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

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

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

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

Depositary Payments—Fiscal Year 2011

WPP did not receive any payments from Citibank, N.A., the Depositary for its American Depositary Receipt program, in 2011.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

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

None.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We performed an evaluation under the supervision and with the participation of our management, including our Group Chief Executive and our Group Finance Director, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as at 31 December 2011. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports. Following the evaluation described above, our management, including the Group Chief Executive and Group Finance Director, concluded that our disclosure controls and procedures were effective at that time.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act). Our management, with the participation of our Group Chief Executive and our Group Finance Director, carried out an assessment of the effectiveness of our internal control over financial reporting (including those applicable to WPP DAS Ltd) as at 31 December 2011. The assessment was performed using the criteria for effective internal control reflected in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on our assessment of the system of internal control, management concludes that as at 31 December 2011 our internal control over financial reporting (including those applicable to WPP DAS Ltd) was effective.

The Company’s internal control over financial reporting, (including those applicable to WPP DAS Ltd) as at 31 December 2011, has been audited by Deloitte LLP, an independent registered public accounting firm, who also audited the Company’s consolidated financial statements. Their audit report on the effectiveness of internal control over financial reporting is presented on page 88.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of WPP plc

We have audited the internal control over financial reporting of WPP plc and subsidiaries (the “Company”) as at 31 December 2011, based on criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting, including those controls applicable to the WPP DAS Ltd. (“the Trust”) based on our audit.

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

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

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

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting, including those applicable to the Trust, as at 31 December 2011, based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as at and for the year ended 31 December 2011 of the Company and financial statements as at and for the year ended 31 December 2011 of the Trust and our reports dated 30 April 2012 expressed an unqualified opinion on those financial statements.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

30 April 2012

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Changes in Internal Control Over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during 2011, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

The audit committee consisted of Paul Spencer, Jeffrey Rosen, Colin Day and Sol Trujillo at 31 December 2011. The board of directors has determined that all members of the audit committee are “independent” as that term is defined in the applicable NASDAQ listing standards and rules of the Securities and Exchange Commission.

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

ITEM 16B. CODE OF ETHICS

WPP has in place a Code of Business Conduct that constitutes a “code of ethics” as defined in applicable regulations of the Securities and Exchange Commission. The Code of Business Conduct (which is regularly reviewed by the Audit Committee and the Board) and was updated in 2011, sets out the principal obligations of all employees. Directors and senior executives throughout the Group are required each year to sign this Code. A copy of the WPP Code of Business Conduct may be obtained free of charge by contacting the Company’s investor relations department in London or New York at the following addresses or telephone numbers:

London:

Deputy Group finance director

WPP

27 Farm Street

London W1J 5RL England

Tel: +44 (0)20 7408 2204

Fax: +44 (0)20 7493 6819

New York:

Investor Relations

WPP

100 Park Avenue

New York, New York 10017-5516

Tel: (212) 632-2200

Fax: (212) 632-2222

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ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

	2011	2010
	£m	£m
Audit fees	19.8	19.3
Tax fees1	3.4	3.9
All other fees2	5.2	5.3
	28.4	28.5

¹  Tax fees comprise tax advisory, planning and compliance services.

²  Other fees comprise assurance services, including fees for due diligence, transition support fees and review of earn-out payment calculations.

Audit Committee Pre-Approval Policies and Procedures

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

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

Not applicable.

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

At the Annual General Meeting of WPP plc on 29 June 2010 a special resolution was passed authorising WPP plc to make market purchases of its own shares up to a maximum number of 125,496,212 ordinary shares. This authority expired at the Annual General Meeting of WPP plc on 2 June 2011 and was replaced by a new authority to purchase up to a maximum number of 126,473,546 ordinary shares until the earlier of the conclusion of the Annual General Meeting of WPP plc in 2012 and 1 September 2012.

	Total number of shares purchased		Average price		Total number of shares purchased as part of publicly announced plan		Maximum number of shares that may yet be purchased under  plan
January		22,432	£	7.83		22,432		123,039,005
February		—		—		—		123,039,005
March		7,827,342	£	8.12		7,827,342		115,211,663
April		600,000	£	7.82		600,000		114,611,663
May		20,239	£	7.65		20,239		114,591,424
June		4,074,490	£	7.43		4,074,490		122,399,056
July		—		—		—		122,399,056
August		3,600,000	£	6.15		3,600,000		118,799,056
September		6,292,797	£	6.13		6,292,797		112,506,259
October		1,751,320	£	6.46		1,751,320		110,754,939
November		308,668	£	6.49		308,668		110,446,271
December		1,446,855	£	6.46		1,446,855		108,999,416
Total		25,944,143	£	7.02		25,944,143

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ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

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

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

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

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

(a) an employees’ share scheme if the scheme involves or may involve the issue of new shares or the transfer of treasury shares; and

(b) a long-term incentive scheme in which one or more directors of the Company is eligible to participate and to material amendments of that scheme to the extent required by the scheme’s rules. In this context, it should be noted that the provisions of the rules relating to whether amendments to the scheme rules must be approved by share owners must themselves be drafted to ensure compliance with the Listing Rules.

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PART III

ITEM 17. FINANCIAL STATEMENTS

Not applicable.

ITEM 18. FINANCIAL STATEMENTS

The Consolidated Financial Statements of WPP plc at 31 December 2011, 2010 and 2009 are included in this report beginning on page F-1.

ITEM 19. EXHIBITS

Exhibit No.		Exhibit Title
	1.1	Memorandum and Articles of Association of WPP plc, as amended 2 June 2011.*
	2.1	Deposit Agreement dated as of 19 November 2008 among WPP plc, Citibank, N.A. as Depositary, and all holders and beneficial owners from time to time of American Depositary Receipts issued thereunder (incorporated herein by reference to Exhibit 99(A) to the Registrant’s Registration Statement on Form F-6EF filed on 18 November 2008).
	2.2	Indenture, dated as of 23 June 2004, among WPP Finance (UK), as Issuer, WPP Group plc, as Guarantor, and Citibank, N.A., as Trustee (incorporated herein by reference to Exhibit 4.14 to the Registration Statement on Form F-4 filed by the Registrant on 21 September 2004 (File No. 333-119163)).
	2.3	First Supplemental Indenture, dated as of 23 June 2004, among WPP Finance (UK), as Issuer, WPP Group plc, as Guarantor, and Citibank, N.A., as Trustee, pertaining to the issuance of U.S. $650,000,000 5.875% Notes due 2014 (incorporated herein by reference to Exhibit 4.15 to the Registration Statement on Form F-4 filed by the Registrant on 21 September 2004 (File No. 333-119163)).
	2.4	Second Supplemental Indenture, dated as of 27 June 2006, among WPP Finance (UK), as Issuer, WPP 2005 Limited and WPP Group plc, as Guarantors, and Citibank, N.A., as Trustee, pertaining to the issuance of U.S. $650,000,000 5.875% Notes due 2014 (incorporated herein by reference to Exhibit 2.11 to the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2005).
	2.5	Form of 5.875% Notes Due 2014 (included as part of Exhibit 2.2).
	2.6	Form of Guarantee of 5.875% Notes due 2014 (included as part of Exhibit 2.2).
	2.7	Third Supplemental Indenture, dated as of 19 December 2006, among WPP Finance (UK), as Issuer, WPP 2005 Limited, WPP Group plc and WPP Spangle, as Guarantors, and Wilmington Trust Company, as Trustee, pertaining to the issuance of U.S. $650,000,000 5.875% Notes due 2014 (incorporated herein by reference to Exhibit 4.4 to the Registrant’s Registration Statement on Form F-3 filed by the Registrant on 27 March 2009 (File No. 333-158262)).
	2.8	Fourth Supplemental Indenture, dated as of 7 October 2008, among WPP Finance (UK), as Issuer, WPP Air 1 Limited and WPP Air 3 Limited, in their capacities as partners of WPP Air UK, Young & Rubicam Brands US Holdings (formerly known as WPP Spangle), WPP 2005 Limited and WPP Group plc, as Guarantors, and Wilmington Trust Company, as Trustee, pertaining to the issuance of U.S. $650,000,000 5.875% Notes due 2014 (incorporated herein by reference to Exhibit 4.5 to the Registrant’s Registration Statement on Form F-3 filed by the Registrant on 27 March 2009 (File No. 333-158262)).

92

Exhibit No.		Exhibit Title
	2.9	Fifth Supplemental Indenture, dated as of 30 April 2009, among WPP Finance (UK), as Issuer, WPP Air 1 Limited and WPP Air 3 Limited, in their capacities as partners of WPP Air UK, Young & Rubicam Brands US Holdings, WPP 2005 Limited, WPP 2008 Limited (formerly known as WPP Group plc) and WPP plc, as Guarantors, and Wilmington Trust Company, as Trustee, pertaining to the issuance of U.S. $650,000,000 5.875% Notes due 2014 (incorporated herein by reference to Exhibit 2.9 to the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	2.10	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to€600 million of 4.375% Bonds due 5 December 2013 (incorporated herein by reference to Exhibit 2.19 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2006).
	2.11	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, indenture instruments relating to £400 million of 6% Bonds due 4 April 2017 (incorporated herein by reference to Exhibit 2.20 of the Registrant’s Annual Report on Form 20-F filed for the year ended 31 December 2006).
	2.12	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to€500 million of 5.25% bonds due 2015 (incorporated herein by reference to Exhibit 2.21 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2007).
	2.13	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to £200 million of 6.375% bonds due 2020 (incorporated herein by reference to Exhibit 2.22 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2007).
	2.14	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to€750 million of 6.25% Guaranteed Bonds due 2016 (incorporated herein by reference to Exhibit 2.23 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2007).
	2.15	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to a U.S. $1,600,000,000 Revolving Credit Facility Agreement dated 23 August 2005 and Amended and Restated on 17 November 2008 (incorporated herein by reference to Exhibit 2.15 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	2.16	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to a £600,000,000 Revolving Credit Facility Agreement dated 9 July 2008 and Amended and Restated on 17 November 2008 (incorporated herein by reference to Exhibit 2.16 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	2.17	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to a £650,000,000 Term Facility Agreement dated 9 July 2008 and Amended and Restated on 17 November 2008 (incorporated herein by reference to Exhibit 2.17 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	2.18	Fifth Supplemental Indenture, dated as of 7 October 2008, among WPP plc, WPP Air 1 Limited and WPP Air 3 Limited, in their capacities as partners of WPP Air UK, WPP Group plc, WPP 2005 Limited, Grey Global Group Inc. and American Stock Transfer & Trust Company, LLC, as Trustee, pertaining to Grey’s 5% Contingent Convertible Subordinated Debentures due 2033 (incorporated herein by reference to Exhibit 2.18 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	2.19	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $600,000,000 of 8% Senior Notes due 2014 (incorporated herein by reference to Exhibit 2.19 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2009).

93

Exhibit No.		Exhibit Title
	2.20	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to £450,000,000 of 5.75% Guaranteed Bonds due 2014 (incorporated herein by reference to Exhibit 2.20 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2009).
	2.21	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $30 million of 6.22% promissory notes due July 10, 2012, and $25 million of 6.34% promissory notes due July 10, 2014 (incorporated herein by reference to Exhibit 2.21 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2009).
	2.22	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $812.4 million of 4.75% Senior Notes due 2021.*
	4.1	J. Walter Thompson Company, Inc. Retained Benefit Supplemental Employee Retirement Plan (incorporated herein by reference to Exhibit 4.9 to the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2000).
	4.2	Young & Rubicam Inc. Deferred Compensation Plan (incorporated herein by reference to Exhibit 10.26 to Young & Rubicam’s Registration Statement on Form S-1 (File No. 333-46929)).
	4.3	Amendment No. 2 to Young & Rubicam Inc. Deferred Compensation Plan effective as of 1 January 1999 (incorporated herein by reference to Exhibit 10.27 to Young & Rubicam’s Annual Report on Form 10-K for the year ended 31 December 1998).
	4.4	Young & Rubicam Inc. 1997 Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.6 to Young & Rubicam’s Registration Statement on Form S-1 (File No. 333-46929)).
	4.5	Amendment to Young & Rubicam Inc. 1997 Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.28 to Young & Rubicam’s Registration Statement on Form S-1 (File No. 333-46929)).
	4.6	Amendment No. 2 to Young & Rubicam Inc. 1997 Incentive Compensation Plan (incorporated herein by reference to Exhibit 10.23 to Young & Rubicam’s Annual Report on Form 10-K for the year ended 31 December 1999).
	4.7	Young & Rubicam Inc. Director Stock Option Plan (incorporated herein by reference to Exhibit 10.25 to Young & Rubicam’s Annual Report on Form 10-K for the year ended 31 December 1999).
	4.8	Young & Rubicam Inc. Executive Income Deferral Program (incorporated herein by reference to Exhibit 4.19 to the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2000).
	4.9	Ogilvy & Mather ERISA Excess Plan Summary Plan Description (incorporated herein by reference to Exhibit 4.12 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.10	Ogilvy & Mather Executive Savings Plan Summary Plan Description, in connection with a 25% matching contribution (incorporated herein by reference to Exhibit 4.13 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.11	Ogilvy & Mather Executive Savings Plan Summary Plan Description, in connection with a 50% matching contribution (incorporated herein by reference to Exhibit 4.14 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.12	Ogilvy & Mather Deferred Compensation Plan Summary Plan Description (incorporated herein by reference to Exhibit 4.15 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.13	Grey Advertising Inc. amended and restated 1994 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.02 to Grey Global Group Inc. Quarterly Report on Form 10-Q for the quarter ended 30 September 1996 (File No. 000-07898)).
	4.14	WPP Executive Stock Option Plan (incorporated herein by reference to Exhibit 4.18 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).

94

Exhibit No.		Exhibit Title
	4.15	WPP plc Performance Share Plan (incorporated herein by reference to Exhibit 4.19 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.16	WPP plc Restricted Stock Plan, as amended through 11 April 2011.*
	4.17	WPP 2005 Executive Stock Option Plan (incorporated herein by reference to Exhibit 4.21 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.18	WPP Annual Bonus Deferral Programme (incorporated herein by reference to Exhibit 4.22 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.19	2004-2006 Long Term Incentive Plan Participant Guide (incorporated herein by reference to Exhibit 4.41 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2005).
	4.20	GroupM Executive Savings Plan Summary Plan Description (incorporated herein by reference to Exhibit 4.24 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.21	WPP 2008 Executive Stock Option Plan (incorporated herein by reference to Exhibit 4.27 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.22	UK Service Agreement, effective from 19 November 2008, between WPP 2005 Limited, Sir Martin Sorrell and WPP plc (incorporated herein by reference to Exhibit 4.28 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.23	Service Agreement in the USA, effective 26 November 2010, between WPP Group USA, Inc. and Sir Martin Sorrell (incorporated herein by reference to Exhibit 4.23 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2010).
	4.24	Service Agreement in the USA, dated 30 April 2009, between WPP Group USA, Inc. and Paul W.G. Richardson (incorporated herein by reference to Exhibit 4.30 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.25	Director’s appointment agreement, dated 21 November 2008, between WPP plc and Paul Richardson (incorporated herein by reference to Exhibit 4.31 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.26	Service Agreement, dated 12 February 2009, between WPP 2005 Limited and Mark Read (incorporated herein by reference to Exhibit 4.32 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.27	Director’s appointment agreement, dated 21 November 2008, between WPP plc and Mark Read (incorporated herein by reference to Exhibit 4.33 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.28	Supplemental Retirement Agreement, dated as of 1 July 2008, by and between WPP Group USA, Inc. and Paul Richardson (incorporated herein by reference to Exhibit 4.34 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.29	Amendment dated 19 November 2008 to Supplemental Retirement Agreement, dated as of 1 July 2008, by and between WPP Group USA, Inc. and Paul Richardson (incorporated herein by reference to Exhibit 4.35 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.30	Stock Purchase Agreement, dated 3 August 1998, among Asatsu Inc., WPP International Holding B.V. and WPP Group plc (incorporated herein by reference to Exhibit 4.36 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.31	24/7 Media, Inc. 1998 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Registration Statement on Form S-1 of 24/7 Media, Inc. filed on June 4, 2009, File No. 333-56085).
	4.32	24/7 Real Media, Inc. 2002 Stock Incentive Plan (incorporated herein by reference to a proxy statement filed by 24/7 Real Media, Inc. on August 9, 2002, File No. 000-29768).

95

Exhibit No.		Exhibit Title
	4.33	Amendment No. 2 to the Grey Global Group Inc. 2003 Senior Management Incentive Plan, effective as of January 1, 2009 (incorporated herein by reference to Exhibit 4.39 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008)
	4.34	Grey Advertising Inc. Senior Executive Officer Post-Employment Compensation Plan (incorporated herein by reference to Exhibit 4.40 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.35	Amendment No. 1 to the Grey Advertising Inc. Senior Executive Officer Post-Employment Compensation Plan, effective as of January 1, 2009 (incorporated herein by reference to Exhibit 4.41 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.36	Amendment No. 1 to the J. Walter Thompson Retained Benefit Supplemental Employee Retirement Plan, effective as of January 1, 2009 (incorporated herein by reference to Exhibit 4.42 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.37	Taylor Nelson Sofres 2001 Equity Participation Plan (incorporated herein by reference to Exhibit 4.43 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.38	Taylor Nelson Sofres plc 2005 Long Term Incentive Plan (incorporated herein by reference to Exhibit 4.44 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.39	Taylor Nelson Sofres New Share Plan (incorporated herein by reference to Exhibit 4.45 of the Registrant’s Annual Report on Form 20-F for the year ended 31 December 2008).
	4.40	Leadership Equity Acquisition Plan III, as amended through 12 November 2011.*
	4.41	Second Amendment, dated 22 June 2011, to Supplemental Retirement Agreement, dated as of 1 July 2008, by and between WPP Group USA, Inc. and Paul Richardson.*
	8.1	List of subsidiaries.*
	12.1	Certification of Group Chief Executive.*
	12.2	Certification of Group Finance Director.*
	13.1	Certification of Group Chief Executive under 18 U.S.C. Section 1350.*
	13.2	Certification of Group Finance Director under 18 U.S.C. Section 1350.*
	14.1	Consent of Independent Registered Public Accounting Firm (for WPP plc and subsidiaries).*
	14.2	Consent of Independent Registered Public Accounting Firm (for WPP DAS Limited).*

* Filed herewith.

96

Signatures

The Registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

WPP plc
By:	/s/    Paul W.G. Richardson
	Paul W. G. Richardson Group Finance Director
	30 April 2012

97

Item 18

INDEX TO FINANCIAL STATEMENTS

Financial Statement Number			Page
	A.	Financial Statements of WPP plc as at and for the years ended 31 December 2011, 2010 and 2009
		(i)  Report of Independent Registered Public Accounting Firm		F-1
		(ii)  Accounting policies		F-2
		(iii)  Consolidated income statement for the years ended 31 December 2011, 2010 and 2009		F-8
		(iv)  Consolidated statement of comprehensive income for the years ended 31  December 2011, 2010 and 2009		F-9
		(v)  Consolidated cash flow statement for the years ended 31 December 2011, 2010 and 2009		F-10
		(vi)  Consolidated balance sheet at 31 December 2011 and 2010		F-11
		(vii)   Consolidated statement of changes in equity for the years ended 31 December 2011, 2010 and 2009		F-12
		(viii)  Notes to the consolidated financial statements		F-13
	B.	Financial Statements of WPP DAS Ltd as at and for the years ended 31 December 2011, 2010 and 2009
		(i)  Report of Independent Registered Public Accounting Firm		F-45
		(ii)  Cash flow statement for the years ended 31 December 2011, 2010 and 2009		F-46
		(iii)  Balance sheet at 31 December 2011 and 2010		F-46
		(iv)  Statement of changes in equity for the years ended 31 December 2011, 2010 and 2009		F-46
		(v)  Notes to the financial statements		F-47

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of WPP plc

We have audited the accompanying consolidated balance sheets of WPP plc and subsidiaries (the “Company”) as at 31 December 2011 and 2010, and the related consolidated income statements, consolidated statements of comprehensive income, consolidated cash flow statements, and consolidated statement of changes in equity for each of the three years in the period ended 31 December 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2011 and 2010, and the results of its operations and cash flows for each of the three years in the period ended 31 December 2011, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as at 31 December 2011, based on the criteria established inInternal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated 30 April 2012 expressed an unqualified opinion on the Company’s internal control over financial reporting.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

30 April 2012

F-1

Our 2011 financial statements

Accounting policies

The consolidated financial statements of WPP plc and its subsidiaries (the Group) for the year ended 31 December 2011 have been preparedin accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board as they apply to the financial statements of the Group for the year ended 31 December 2011.

Basis of preparation

The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments. The principal accounting policies are set out below.

The financial statements were approved by the Board of Directors and authorised for issue on 30 April 2012.

Basis of consolidation

The consolidated financial statements include the results of the Company and all its subsidiary undertakings made up to the same accounting date. All intra-Group balances, transactions, income and expenses are eliminated in full on consolidation. The results of subsidiary undertakings acquired or disposed of during the period are included or excluded from the consolidated income statement from the effective date of acquisition or disposal.

Goodwill and other intangible assets

Intangible assets comprise goodwill, certain acquired separable corporate brand names, acquired customer relationships, acquired proprietary tools and capitalised computer software not integral to a related item of hardware.

Goodwill represents the excess of fair value attributed to investments in businesses or subsidiary undertakings over the fair value of the underlying net assets, including intangible assets, at the date of their acquisition.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the net present value of future cash flows derived from the underlying assets using a projection period of up to five years for each cash-generating unit. After the projection period a steady growth rate representing an appropriate long-term growth rate for the industry is applied. Any impairment is recognised immediately as an expense and is not subsequently reversed.

Corporate brand names, customer relationships and proprietary tools acquired as part of acquisitions of businesses are capitalised separately from goodwill as intangible assets if their value can be measured reliably on initial recognition and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group.

Certain corporate brands of the Group are considered to have an indefinite economic life because of the institutional nature of the corporate brand names, their proven ability to maintain market leadership and profitable operations over long periods of time and the Group’s commitment to develop and enhance their value. The carrying value of these intangible assets is reviewed at least annually for impairment and adjusted to the recoverable amount if required.

Amortisation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its estimated useful life as follows:

Acquired intangibles

• Brand names (with finite lives) – 10-20 years.

• Customer related intangibles – 3-10 years.

• Other proprietary tools – 3-10 years.

• Other (including capitalised computer software) – 3-5 years.

Contingent consideration

Contingent consideration is accounted for in accordance with IFRS 3 (revised) Business Combinations.

Future anticipated payments to vendors in respect of contingent consideration (earnout agreements) are initially recorded at fair value which is the present value of the expected cash outflows of the obligations. The obligations are dependent on the future financial performance of the interests acquired (typically over a four to five year period following the year of acquisition) and assume the operating companies improve profits in line with directors’ estimates. The directors derive their estimates from internal business plans together with financial due diligence performed in connection with the acquisition.

Subsequent adjustments to the fair value are recorded in the consolidated income statement within revaluation of financial instruments. For acquisitions completed prior to 1 January 2010, such adjustments are recorded in the consolidated balance sheet within goodwill.

F-2

Accounting policies (continued)

Property, plant and equipment

Property, plant and equipment are shown at cost less accumulated depreciation and any provision for impairment with the exception of freehold land which is not depreciated. The Group assesses the carrying value of its property, plant and equipment to determine if any impairment has occurred. Where this indicates that an asset may be impaired, the Group applies the requirements of IAS 36 Impairment of Assets in assessing the carrying amount of the asset. This process includes comparing its recoverable amount with its carrying value. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset on a straight-line basis over its estimated useful life, as follows:

• Freehold buildings – 50 years.

• Leasehold land and buildings – over the term of the lease or life of the asset, if shorter.

• Fixtures, fittings and equipment – 3-10 years.

• Computer equipment – 3-5 years.

Interests in associates and joint ventures

An associate is an entity over which the Group has significant influence. In certain circumstances, significant influence may be represented by factors other than ownership and voting rights, such as representation on the Board of Directors.

The Group’s share of the profits less losses of associate undertakings net of tax, interest and non-controlling interests is included in the consolidated income statement and the Group’s share of net assets is shown within interests in associates in the consolidated balance sheet. The Group’s share of the profits less losses and net assets is based on current information produced by the undertakings, adjusted to conform with the accounting policies of the Group.

The Group assesses the carrying value of its associate undertakings to determine if any impairment has occurred. Where this indicates that an investment may be impaired, the Group applies the requirements of IAS 36 in assessing the carrying amount of the investment. This process includes comparing its recoverable amount with its carrying value.

The Group accounts for joint venture investments under the equity method which is consistent with the Group’s treatment of associates.

Other investments

Other investments are designated as ‘available for sale’ and are shown at fair value with any movements in fair value taken to equity.

On disposal the cumulative gain or loss previously recognised in equity is included in the profit or loss for the year.

Inventory and work in progress

Work in progress is valued at cost, which includes outlays incurred on behalf of clients and an appropriate proportion of directly attributable costs and overheads on incomplete assignments. Provision is made for irrecoverable costs where appropriate. Inventory is stated at the lower of cost and net realisable value.

Trade receivables

Trade receivables are stated net of provisions for bad and doubtful debts.

Foreign currency and interest rate hedging

The Group’s policy on interest rate and foreign exchange rate management sets out the instruments and methods available to hedge interest and currency risk exposures and the control procedures in place to ensure effectiveness.

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

Derivatives are initially recognised at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each balance sheet date. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

At the inception of the hedge relationship the entity documents the relationship between the hedging instrument and hedged item, along with its risk management objectives and its strategy for undertaking various hedge transactions. Furthermore, at the inception of the hedge and on an ongoing basis, the Group documents whether the hedging instrument that is used in a hedging relationship is highly effective in offsetting changes in fair values or cash flows of the hedged item.

F-3

Accounting policies (continued)

Note 25 contains details of the fair values of the derivative instruments used for hedging purposes.

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss immediately, together with any changes in the fair value of the hedged item that is attributable to the hedged risk.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow or net investment hedges is deferred in equity. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. Amounts deferred in equity are recycled in profit or loss in the periods when the hedged item is recognised in profit or loss. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss on the hedging instrument recognised in equity is retained in equity until the forecast transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognised in equity is transferred to net profit or loss for the period.

Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value with unrealised gains or losses reported in the consolidated income statement.

Liabilities in respect of option agreements

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

Derecognition of financial liabilities

In accordance with IAS 39 Financial Instruments: Recognition and Measurement, a financial liability of the Group is only released to the consolidated income statement when the underlying legal obligation is extinguished.

Convertible debt

Convertible debt is assessed according to the substance of the contractual arrangements and is classified into liability and equity elements on the basis of the initial fair value of the liability element. The difference between this figure and the cash received is classified as equity.

The consolidated income statement charge for the finance cost is spread evenly over the term of the convertible debt so that at redemption the liability equals the redemption value.

Other debt

Other interest-bearing debt is recorded at the proceeds received, net of direct issue costs.

Borrowing costs

Finance costs of borrowing are recognised in the consolidated income statement over the term of those borrowings.

Revenue recognition

Revenue comprises commission and fees earned in respect of amounts billed. Direct costs include fees paid to external suppliers where they are retained to perform part or all of a specific project for a client and the resulting expenditure is directly attributable to the revenue earned. Revenue is stated exclusive of VAT, sales taxes and trade discounts.

Advertising and Media Investment Management

Revenue is typically derived from commissions on media placements and fees for advertising services. Revenue may consist of various arrangements involving commissions, fees, incentive-based revenue or a combination of the three, as agreed upon with each client.

Revenue is recognised when the service is performed, in accordance with the terms of the contractual arrangement. The amount of revenue recognised depends on whether we act as an agent or as a principal in an arrangement with a client. Where we act as an agent, the revenue recorded is the net amount retained when the fee or commission is earned. Although the Group may bear credit risk in respect of these activities, the arrangements with our clients are such that we consider that we are acting as an agent on their behalf. In such cases, costs

F-4

Accounting policies (continued)

incurred with external suppliers (such as media suppliers) are excluded from our revenue. Where the Group acts as a principal and contracts directly with suppliers for media payments and production costs, the revenue recorded is the gross amount billed.

Incentive-based revenue typically comprises both quantitative and qualitative elements; on the element related to quantitative targets, revenue is recognised when the quantitative targets have been achieved; on the element related to qualitative targets, revenue is recognised when the incentive is received or receivable.

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

Consumer Insight

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

While most of the studies provided in connection with the Group’s market research contracts are undertaken in response to an individual client’s or group of clients’ specifications, in certain instances a study may be developed as an off-the-shelf product offering sold to a broad client base. For these transactions, revenue is recognised when the product is delivered. Where the terms of transaction provide for licensing the product on a subscription basis, revenue is recognised over the subscription period on a straight-line basis or, if applicable, based on usage.

Substantially all services are provided on a fixed price basis. Pricing may also include a provision for a surcharge where the actual labour hours incurred in completing a project are significantly above the labour hours quoted in the project proposal. In instances where this occurs, the surcharge will be included in the total revenue base on which to measure proportional performance when the actual threshold is reached provided that collectability is reasonably assured.

Public Relations & Public Affairs and Branding & Identity, Healthcare and Specialist Communications

Revenue is typically derived from retainer fees and services to be performed subject to specific agreement. Revenue is recognised when the service is performed, in accordance with the terms of the contractual arrangement. Revenue is recognised on long-term contracts, if the final outcome can be assessed with reasonable certainty, by including in the consolidated income statement revenue and related costs as contract activity progresses.

Taxation

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

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

The tax laws that apply to the Group’s subsidiaries may be amended by the relevant tax authorities. Such potential amendments are regularly monitored and adjustments are made to the Group’s tax liabilities and deferred tax assets and liabilities where necessary.

F-5

Accounting policies (continued)

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are recognised for all taxable temporary differences unless specifically excepted by IAS 12 Income Taxes. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or other assets and liabilities (other than in a business combination) in a transaction that affects neither the tax profit nor the accounting profit.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on enacted or substantively enacted legislation. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Retirement benefit costs

For defined contribution plans, contributions are charged to the consolidated income statement as payable in respect of the accounting period.

For defined benefit plans the amounts charged to operating profit are the current service costs and gains and losses on settlements and curtailments. They are included as part of staff costs. Past service costs are recognised immediately in the consolidated income statement if the benefits have vested. If the benefits have not vested, the costs are recognised over the period until vesting occurs. The interest cost and the expected return on assets are shown within finance costs and finance income respectively. Actuarial gains and losses are recognised immediately in the consolidated statement of comprehensive income.

Where defined benefit plans are funded, the assets of the plan are held separately from those of the Group, in separate trustee-administered funds. Pension plan assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high-quality corporate bond of equivalent currency and term to the plan liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date.

Recognition of a surplus in a defined benefit plan is limited based on the economic gain the company is expected to benefit from in the future by means of a refund or reduction in future contributions to the plan, in accordance with IAS 19 Employee Benefits.

Finance leases

Assets held under finance leases are recognised as assets of the Group at the inception of the lease at the lower of their fair value and the present value of the minimum lease payments. Depreciation on leased assets is charged to the consolidated income statement on the same basis as owned assets. Leasing payments are treated as consisting of capital and interest elements and the interest is charged to the consolidated income statement as it is incurred.

Operating leases

Operating lease rentals are charged to the consolidated income statement on a straight-line basis over the lease term. Any premium or discount on the acquisition of a lease is spread over the life of the lease on a straight-line basis.

F-6

Accounting policies (continued)

Translation of foreign currencies

Foreign currency transactions arising from normal trading activities are recorded at the rates in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are translated at the year-end exchange rate. Foreign currency gains and losses are credited or charged to the consolidated income statement as they arise.

The income statements of overseas subsidiary undertakings are translated into pounds sterling at average exchange rates and the year-end net assets of these companies are translated at year-end exchange rates.

Exchange differences arising from retranslation of the opening net assets and on foreign currency borrowings (to the extent that they hedge the Group’s investment in such operations) are reported in the consolidated statement of comprehensive income.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Share-based payments

The Group issues equity-settled share-based payments (including share options) to certain employees and accounts for these awards in accordance with IFRS 2 Share-Based Payment. Equity-settled share-based payments are measured at fair value (excluding the effect of non-market-based vesting conditions) at the date of grant. Details regarding the fair value of equity settled share-based transactions are set out in notes 22 and 26.

The fair value determined at the grant date is recognised in the consolidated income statement as an expense on a straight-line basis over the relevant vesting period, based on the Group’s estimate of the number of shares that will ultimately vest and adjusted for the effect of non-market-based vesting conditions.

New IFRS accounting pronouncements

At the date of authorisation of these financial statements, the following Standards and Interpretations, which have not been applied in these financial statements, were in issue but not yet effective:

• IFRS 7 (amended): Financial Instruments: Disclosures;

• IFRS 9: Financial Instruments;

• IFRS 10: Consolidated Financial Statements;

• IFRS 11: Joint Arrangements;

• IFRS 12: Disclosure of Interests in Other Entities;

• IFRS 13: Fair Value Measurement;

• IAS 1 (amended): Presentation of Financial Statements;

• IAS 12 (amended): Income Taxes;

• IAS 19 (amended): Employee Benefits;

• IAS 27 (revised): Separate Financial Statements;

• IAS 28 (revised): Investments in Associates and Joint Ventures; and

• IAS 32 (amended): Financial Instruments: Presentation.

The Group does not consider that these Standards and Interpretations will have a significant impact on the financial statements of the Group except for additional disclosures when the relevant standards come into effect.

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

• IAS 24 (revised): Related Party Transactions;

• IAS 32 (amended): Classification of Rights Issues;

• IFRIC 14 (amended)/IAS 19 (amended): The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction; and

• IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments.

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

Critical judgements in applying accounting policies

Management is required to make key decisions and judgements in the process of applying the Group’s accounting policies. The most significant areas where such judgements have been necessary are revenue recognition, goodwill and other intangibles, acquisition reserves, taxation and accounting for pension liabilities. Where judgement has been applied, the key factors taken into consideration are disclosed in the accounting policies and the appropriate note in these financial statements.

F-7

Consolidated income statement

For the years ended 31 December 2011, 2010, 2009

	Notes	2011 £m			2010 £m			2009 £m
Revenue	2		10,021.8			9,331.0			8,684.3
Direct costs			(783.3	)		(770.5	)		(703.6	)
Gross profit			9,238.5			8,560.5			7,980.7
Operating costs	3		(8,046.3	)		(7,587.5	)		(7,219.0	)
Operating profit			1,192.2			973.0			761.7
Share of results of associates	4		66.1			55.2			57.0
Profit before interest and taxation			1,258.3			1,028.2			818.7
Finance income	6		97.3			81.7			150.4
Finance costs	6		(297.2	)		(276.8	)		(355.4	)
Revaluation of financial instruments	6		(50.0	)		18.2			48.9
Profit before taxation			1,008.4			851.3			662.6
Taxation	7		(91.9	)		(190.3	)		(155.7	)
Profit for the year			916.5			661.0			506.9
Attributable to:
Equity holders of the parent			840.1			586.0			437.7
Non-controlling interests			76.4			75.0			69.2
			916.5			661.0			506.9
Earnings per share1
Basic earnings per ordinary share	9		67.6p			47.5p			35.9p
Diluted earnings per ordinary share	9		64.5p			45.9p			35.3p

Notes

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-44 form an integral part of this consolidated income statement.

¹  The calculations of the Group’s earnings per share are set out in note 9.

F-8

Consolidated statement of comprehensive income

For the years ended 31 December 2011, 2010, 2009

	2011 £m			2010 £m			2009 £m
Profit for the year		916.5			661.0			506.9
Exchange adjustments on foreign currency net investments		(256.3	)		156.3			(155.6	)
Gain/(loss) on revaluation of available for sale investments		11.3			(59.8	)		(13.5	)
Actuarial loss on defined benefit pension plans		(72.0	)		(0.4	)		(7.2	)
Deferred tax on defined benefit pension plans		0.1			0.2			(4.4	)
Other comprehensive (loss)/income relating to the year		(316.9	)		96.3			(180.7	)
Total comprehensive income relating to the year		599.6			757.3			326.2
Attributable to:
Equity holders of the parent		529.5			672.6			270.4
Non-controlling interests		70.1			84.7			55.8
		599.6			757.3			326.2

Note

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-44 form an integral part of this consolidated statement of comprehensive income.

F-9

Consolidated cash flow statement

For the years ended 31 December 2011, 2010, 2009

	Notes		2011 £m			2010 £m			2009 £m
Net cash inflow from operating activities		11		665.2			1,361.2			818.8
Investing activities
Acquisitions and disposals		11		(469.8	)		(200.1	)		(118.4	)
Purchases of property, plant and equipment				(216.1	)		(190.5	)		(222.9	)
Purchases of other intangible assets (including capitalised computer software)				(37.1	)		(27.0	)		(30.4	)
Proceeds on disposal of property, plant and equipment				13.2			7.6			9.2
Net cash outflow from investing activities				(709.8	)		(410.0	)		(362.5	)
Financing activities
Share option proceeds				28.8			42.7			4.1
Cash consideration for non-controlling interests		11		(62.6	)		(15.1	)		(26.4	)
Share repurchases and buy-backs		11		(182.2	)		(46.4	)		(9.5	)
Net increase/(decrease) in borrowings		11		301.4			19.8			(426.3	)
Financing and share issue costs				(11.9	)		(3.5	)		(18.8	)
Equity dividends paid				(218.4	)		(200.4	)		(189.8	)
Dividends paid to non-controlling interests in subsidiary undertakings				(62.2	)		(66.7	)		(63.0	)
Net cash outflow from financing activities				(207.1	)		(269.6	)		(729.7	)
Net (decrease)/increase in cash and cash equivalents				(251.7	)		681.6			(273.4	)
Translation differences				(29.9	)		82.2			(98.7	)
Cash and cash equivalents at beginning of year				1,709.8			946.0			1,318.1
Cash and cash equivalents at end of year		11		1,428.2			1,709.8			946.0

Note

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-44 form an integral part of this consolidated cash flow statement.

F-10

Consolidated balance sheet

At 31 December 2011, 2010

	Notes		2011 £m			2010 £m
Non-current assets
Intangible assets:
Goodwill		12		9,430.8			9,106.3
Other		12		1,859.9			1,904.5
Property, plant and equipment		13		728.3			708.4
Interests in associates and joint ventures		14		801.3			792.1
Other investments		14		190.8			173.7
Deferred tax assets		15		86.0			79.1
Trade and other receivables		17		309.1			323.5
				13,406.2			13,087.6
Current assets
Inventory and work in progress		16		333.9			366.0
Corporate income tax recoverable				88.5			82.9
Trade and other receivables		17		8,919.7			8,843.4
Cash and short-term deposits				1,946.6			1,965.2
				11,288.7			11,257.5
Current liabilities
Trade and other payables		18		(11,165.5	)		(11,703.6	)
Corporate income tax payable				(113.4	)		(115.8	)
Bank overdrafts and loans		20		(518.4	)		(255.4	)
				(11,797.3	)		(12,074.8	)
Net current liabilities				(508.6	)		(817.3	)
Total assets less current liabilities				12,897.6			12,270.3
Non-current liabilities
Bonds and bank loans		20		(3,893.0	)		(3,598.2	)
Trade and other payables		19		(553.1	)		(388.6	)
Corporate income tax payable				(379.5	)		(481.8	)
Deferred tax liabilities		15		(741.4	)		(750.7	)
Provision for post-employment benefits		23		(282.3	)		(241.5	)
Provisions for liabilities and charges		21		(154.0	)		(161.6	)
				(6,003.3	)		(5,622.4	)
Net assets				6,894.3			6,647.9
Equity
Called-up share capital		26		126.6			126.4
Share premium account				105.7			54.5
Shares to be issued				2.4			3.1
Merger reserve				(5,136.2	)		(5,136.8	)
Other reserves		27		938.9			1,182.8
Own shares				(177.6	)		(144.8	)
Retained earnings				10,803.5			10,361.4
Equity share owners’ funds				6,663.3			6,446.6
Non-controlling interests				231.0			201.3
Total equity				6,894.3			6,647.9

Note

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-44 form an integral part of this consolidated balance sheet.

F-11

Consolidated statement of changes in equity

For the years ended 31 December 2011, 2010, 2009

	Called-up share capital £m			Share premium account £m		Shares to be issued £m			Merger reserve £m			Other reserves1 £m			Own shares £m			Retained earnings £m			Total equity share owners’ funds £m			Non- controlling interests £m			Total £m
Balance at 1 January 2009		125.5			8.6		8.7			(5,138.8	)		1,250.5			(189.8	)		9,697.5			5,762.2			197.6			5,959.8
Ordinary shares issued		0.1			4.0		(1.7	)		0.8			–			–			0.3			3.5			–			3.5
Exchange adjustments on foreign currency net investments		–			–		–			–			(142.2	)		–			–			(142.2	)		(13.4	)		(155.6	)
Net profit for the year		–			–		–			–			–			–			437.7			437.7			69.2			506.9
Dividends paid		–			–		–			–			–			–			(189.8	)		(189.8	)		(63.0	)		(252.8	)
Transfer from goodwill		–			–		(1.5	)		–			–			–			–			(1.5	)		–			(1.5	)
Non-cash share-based incentive plans (including stock options)		–			–		–			–			–			–			54.9			54.9			–			54.9
Net movement in own shares held by ESOP Trusts		–			–		–			–			–			45.3			(45.3	)		–			–			–
Treasury shares additions		–			–		–			–			–			(9.5	)		–			(9.5	)		–			(9.5	)
Actuarial loss on defined benefit plans		–			–		–			–			–			–			(7.2	)		(7.2	)		–			(7.2	)
Deferred tax on defined benefit plans		–			–		–			–			–			–			(4.4	)		(4.4	)		–			(4.4	)
Loss on revaluation of available for sale investments		–			–		–			–			(13.5	)		–			–			(13.5	)		–			(13.5	)
Equity component of convertible bonds (net of deferred tax)		–			–		–			–			34.7			–			–			34.7			–			34.7
Recognition/remeasurement of financial instruments		–			–		–			–			(36.4	)		–			5.5			(30.9	)		–			(30.9	)
Acquisition of subsidiaries		–			–		–			–			–			–			–			–			(8.7	)		(8.7	)
Balance at 31 December 2009		125.6			12.6		5.5			(5,138.0	)		1,093.1			(154.0	)		9,949.2			5,894.0			181.7			6,075.7
Ordinary shares issued		0.8			41.9		(2.4	)		1.2			–			–			0.9			42.4			–			42.4
Exchange adjustments on foreign currency net investments		–			–		–			–			146.6			–			–			146.6			9.7			156.3
Net profit for the year		–			–		–			–			–			–			586.0			586.0			75.0			661.0
Dividends paid		–			–		–			–			–			–			(200.4	)		(200.4	)		(66.7	)		(267.1	)
Non-cash share-based incentive plans (including stock options)		–			–		–			–			–			–			70.4			70.4			–			70.4
Tax adjustment on share-based payments		–			–		–			–			–			–			21.1			21.1			–			21.1
Net movement in own shares held by ESOP Trusts		–			–		–			–			–			9.2			(55.6	)		(46.4	)		–			(46.4	)
Actuarial loss on defined benefit plans		–			–		–			–			–			–			(0.4	)		(0.4	)		–			(0.4	)
Deferred tax on defined benefit plans		–			–		–			–			–			–			0.2			0.2			–			0.2
Loss on revaluation of available for sale investments		–			–		–			–			(59.8	)		–			–			(59.8	)		–			(59.8	)
Recognition/remeasurement of financial instruments		–			–		–			–			2.9			–			0.9			3.8			–			3.8
Acquisition of subsidiaries2		–			–		–			–			–			–			(10.9	)		(10.9	)		1.6			(9.3	)
Balance at 31 December 2010		126.4			54.5		3.1			(5,136.8	)		1,182.8			(144.8	)		10,361.4			6,446.6			201.3			6,647.9
Ordinary shares issued		0.6			30.4		(0.7	)		0.6			–			–			–			30.9			–			30.9
Share cancellations		(0.7	)		–		–			–			0.7			–			(45.9	)		(45.9	)		–			(45.9	)
Treasury share additions		–			–		–			–			–			(29.8	)		–			(29.8	)		–			(29.8	)
Treasury share allocations		–			–		–			–			–			0.8			(0.8	)		–			–			–
Exchange adjustments on foreign currency net investments		–			–		–			–			(250.0	)		–			–			(250.0	)		(6.3	)		(256.3	)
Net profit for the year		–			–		–			–			–			–			840.1			840.1			76.4			916.5
Dividends paid		–			–		–			–			–			–			(218.4	)		(218.4	)		(62.2	)		(280.6	)
Scrip dividend		0.3			20.8		–			–			–			–			(21.1	)		–			–			–
Non-cash share-based incentive plans (including stock options)		–			–		–			–			–			–			78.8			78.8			–			78.8
Tax adjustment on share-based payments		–			–		–			–			–			–			(11.7	)		(11.7	)		–			(11.7	)
Net movement in own shares held by ESOP Trusts		–			–		–			–			–			(3.8	)		(102.7	)		(106.5	)		–			(106.5	)
Actuarial loss on defined benefit plans		–			–		–			–			–			–			(72.0	)		(72.0	)		–			(72.0	)
Deferred tax on defined benefit plans		–			–		–			–			–			–			0.1			0.1			–			0.1
Gain on revaluation of available for sale investments		–			–		–			–			11.3			–			–			11.3			–			11.3
Recognition/remeasurement of financial instruments		–			–		–			–			(5.9	)		–			33.8			27.9			–			27.9
Acquisition of subsidiaries2		–			–		–			–			–			–			(38.1	)		(38.1	)		21.8			(16.3	)
Balance at 31 December 2011		126.6			105.7		2.4			(5,136.2	)		938.9			(177.6	)		10,803.5			6,663.3			231.0			6,894.3

Notes

The accounting policies on pages F-2 to F-7 and the accompanying notes on pages F-13 to F-44 form an integral part of this consolidated statement of changes in equity.

¹  Other reserves are analysed in note 27.

²  Acquisition of subsidiaries represents movements in retained earnings and non-controlling interests arising from changes in ownership of existing subsidiaries and recognition of non-controlling interests on new acquisitions.

Total comprehensive income relating to the year ended 31 December 2011 was £599.6 million (2010: £757.3 million, 2009: £326.2 million).

F-12

Notes to the consolidated financial statements

1. General information

WPP plc is a company incorporated in Jersey. The address of the registered office is 22 Grenville Street, St Helier, Jersey, JE4 8PX and the address of the principal executive office is 6 Ely Place, Dublin 2, Ireland. The nature of the Group’s operations and its principal activities are set out in note 2. These consolidated financial statements are presented in pounds sterling.

2. Segment information

The Group is a leading worldwide communications services organisation offering national and multinational clients a comprehensive range of communications services.

The Group is organised into four reportable segments – Advertising and Media Investment Management; Consumer Insight; Public Relations & Public Affairs; and Branding & Identity, Healthcare and Specialist Communications. This last reportable segment includes WPP Digital and direct, digital, promotional and relationship marketing.

IFRS 8 Operating Segments requires operating segments to be identified on the same basis as is used internally for the review of performance and allocation of resources by the Group chief executive. Provided certain quantitative and qualitative criteria are fulfilled, IFRS 8 permits the aggregation of these components into reportable segments for the purposes of disclosure in the Group’s financial statements. In assessing the Group’s reportable segments, the directors have had regard to the similar economic characteristics of certain operating segments, their shared client base, the similar nature of their products or services and their long-term margins, amongst other factors.

Operating sectors

Reported contributions were as follows:

	Revenue1		Headline PBIT2		Headline PBIT margin		Revenue1		Headline PBIT2		Headline PBIT margin		Revenue1		Headline PBIT2		Headline PBIT margin
	2011 £m		2011 £m		2011 %		2010 £m		2010 £m		2010 %		2009 £m		2009 £m		2009 %
Advertising and Media Investment Management		4,157.2		667.9		16.1		3,733.3		573.0		15.3		3,420.5		472.8		13.8
Consumer Insight		2,458.0		258.7		10.5		2,430.2		234.8		9.7		2,297.1		196.9		8.6
Public Relations & Public Affairs		885.4		142.9		16.1		844.5		133.1		15.8		795.7		122.1		15.3
Branding & Identity, Healthcare and Specialist Communications		2,521.2		359.5		14.3		2,323.0		287.8		12.4		2,171.0		225.4		10.4
		10,021.8		1,429.0		14.3		9,331.0		1,228.7		13.2		8,684.3		1,017.2		11.7

Notes

¹ Intersegment sales have not been separately disclosed as they are not material.

² A reconciliation from profit before interest and taxation (PBIT) to headline PBIT is provided in note 31. PBIT is reconciled to profit before taxation in the consolidated income statement.

Other information	Share-based payments		Capital additions1		Depreciation and amortisation2		Goodwill impairment & write-downs		Share of results of associates		Interests in associates and joint ventures
	£m		£m		£m		£m		£m		£m
2011
Advertising and Media Investment Management		44.5		112.7		94.2		–		36.4		549.9
Consumer Insight		12.7		63.1		49.8		–		16.3		101.3
Public Relations & Public Affairs		3.9		15.4		15.8		–		3.2		42.6
Branding & Identity, Healthcare and Specialist Communications		17.7		62.0		51.7		–		10.2		107.5
		78.8		253.2		211.5		–		66.1		801.3
2010
Advertising and Media Investment Management		36.8		95.6		94.2		0.3		26.2		487.3
Consumer Insight		13.7		58.9		49.8		–		15.1		122.6
Public Relations & Public Affairs		3.3		12.9		14.1		2.0		4.1		58.7
Branding & Identity, Healthcare and Specialist Communications		16.6		50.1		52.2		7.7		9.8		123.5
		70.4		217.5		210.3		10.0		55.2		792.1
2009
Advertising and Media Investment Management		23.1		166.5		99.7		33.3		30.7		445.9
Consumer Insight		11.5		51.6		53.5		–		16.9		114.5
Public Relations & Public Affairs		4.4		19.2		15.2		–		2.7		60.3
Branding & Identity, Healthcare and Specialist Communications		15.9		43.8		57.4		11.0		6.7		108.6
		54.9		281.1		225.8		44.3		57.0		729.3

Notes

¹  Capital additions include purchases of property, plant and equipment and other intangible assets (including capitalised computer software).

²  Depreciation of property, plant and equipment and amortisation of other intangible assets.

F-13

Notes to the consolidated financial statements (continued)

2. Segment information (continued)

	Assets							Liabilities
Balance sheet	Segment assets		Unallocated corporate assets1		Consolidated total assets			Segment liabilities			Unallocated corporate liabilities1			Consolidated total liabilities
	£m		£m		£m			£m			£m			£m
2011
Advertising and Media Investment Management		12,075.9							(9,331.8	)
Consumer Insight		3,525.3							(1,058.2	)
Public Relations & Public Affairs		1,825.0							(411.4	)
Branding & Identity, Healthcare and Specialist Communications		5,147.6							(1,353.5	)
		22,573.8		2,121.1		24,694.9			(12,154.9	)		(5,645.7	)		(17,800.6	)
2010							��
Advertising and Media Investment Management		11,795.7							(9,553.6	)
Consumer Insight		3,691.2							(1,143.9	)
Public Relations & Public Affairs		1,699.6							(388.4	)
Branding & Identity, Healthcare and Specialist Communications		5,031.4							(1,409.4	)
		22,217.9		2,127.2		24,345.1			(12,495.3	)		(5,201.9	)		(17,697.2	)

Note

¹ Included in unallocated corporate assets and liabilities are corporate income tax, deferred tax and net interest-bearing debt.

F-14

Notes to the consolidated financial statements (continued)

2. Segment information (continued)

Contributions by geographical area were as follows:

		2011 £m		2010 £m		2009 £m
Revenue1
North America5		3,388.2		3,299.8		3,010.0
UK		1,183.5		1,087.6		1,029.0
Western Continental Europe4		2,505.1		2,325.3		2,327.8
Asia Pacific, Latin America,
Africa & Middle East and
Central & Eastern Europe		2,945.0		2,618.3		2,317.5
		10,021.8		9,331.0		8,684.3
	Margin		Margin		Margin
Headline PBIT2
North America5	15.5%	525.6	14.7%	484.6	13.2%	397.9
UK	14.0%	165.3	13.6%	147.9	12.8%	131.5
Western Continental Europe4	11.3%	284.0	9.5%	221.6	8.3%	193.4
Asia Pacific, Latin America,
Africa & Middle East and
Central & Eastern Europe	15.4%	454.1	14.3%	374.6	12.7%	294.4
	14.3%	1,429.0	13.2%	1,228.7	11.7%	1,017.2
Non-current assets3
North America5		4,960.4		4,742.7
UK		1,728.1		1,693.3
Western Continental Europe4		3,681.8		3,728.6
Asia Pacific, Latin America,
Africa & Middle East and
Central & Eastern Europe		2,765.0		2,649.2
		13,135.3		12,813.8

Notes

¹  Intersegment sales have not been separately disclosed as they are not material.

² See note 31 for a reconciliation of headline PBIT to PBIT.

³  Non-current assets excluding financial instruments and deferred tax.

⁴  Western Continental Europe includes Ireland with revenue of £40.3 million (2010: £37.4 million, 2009: £43.4 million), headline PBIT of £1.1 million (2010: £ 2.0 million, 2009: £3.9 million) and non-current assets of £52.4 million (2010: £65.0 million).

⁵  North America includes the US with revenues of £3,149.9 million (2010: £ 3,097.9 million, 2009: £2,835.8 million), headline PBIT of £490.2 million (2010: £448.7 million, 2009: £370.9 million) and non-current assets of £4,396.5 million (2010: £4,209.7 million).

3. Operating costs

	2011 £m			2010 £m			2009 £m
Staff costs (note 5)		5,872.5			5,438.7			5,117.0
Establishment costs		674.1			659.2			691.6
Other operating costs (net)		1,499.7			1,489.6			1,410.4
Total operating costs		8,046.3			7,587.5			7,219.0
Operating costs include:
Goodwill impairment (note 12)		–			10.0			44.3
Investment write-downs		32.8			37.5			11.1
Amortisation and impairment of acquired intangible assets (note 12)		172.0			170.5			172.6
Amortisation of other intangible assets (note 12)		25.7			25.4			30.5
Depreciation of property, plant and equipment		178.7			178.3			189.9
(Gains)/losses on sale of property, plant and equipment		(0.9	)		0.7			0.4
Gains on disposal of investments		(0.4	)		(4.1	)		(31.1	)
Gains on re-measurement of equity interest on acquisition of controlling interest		(31.6	)		(13.7	)		–
Net foreign exchange losses		1.1			8.0			6.4
Operating lease rentals:
Land and buildings		459.6			449.9			461.5
Sublease income		(29.1	)		(32.8	)		(27.0	)
		430.5			417.1			434.5
Plant and machinery		23.0			24.8			28.0
		453.5			441.9			462.5

3. Operating costs (continued)

In 2011, operating profit includes credits totalling £14.0 million (2010: £16.5 million, 2009: £19.4 million) relating to the release of excess provisions and other balances established in respect of acquisitions completed prior to 2010. Further details of the Group’s approach to acquisition reserves, as required by IFRS 3 (revised) Business Combinations, are given in note 28.

Investment write-downs of £32.8 million (2010: £37.5 million) relate to certain non-core minority investments in the US and Continental Europe where forecast financial performance and/or liquidity issues indicate a permanent decline in the recoverability of the Group’s investment.

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

Auditors’ remuneration:

	2011 £m		2010 £m		2009 £m
Fees payable to the Company’s auditors for the audit of the Company’s annual accounts		1.4		1.4		1.5
The audit of the Company’s subsidiaries pursuant to legislation		15.3		14.8		15.0
		16.7		16.2		16.5
Other services pursuant to legislation		3.1		3.1		3.2
Fees payable to the auditors pursuant to legislation		19.8		19.3		19.7
Tax advisory services		2.3		2.7		2.6
Tax compliance services		1.1		1.2		1.5
		3.4		3.9		4.1
Corporate finance services		0.5		0.2		0.2
Other services1		4.7		5.1		4.8
Total non-audit fees		8.6		9.2		9.1
Total fees		28.4		28.5		28.8

Note

¹  Other services include audits for earnout purposes and services for expatriate employees.

Minimum committed annual rentals

Amounts payable in 2012 under the foregoing leases will be as follows:

	Plant and machinery						Land and buildings
	2012 £m		2011 £m		2010 £m		2012 £m		2011 £m		2010 £m
In respect of operating leases which expire:
– within one year		5.5		4.8		4.1		27.4		32.7		43.1
– within two to five years		13.2		14.8		14.6		190.7		163.4		145.2
– after five years		0.5		0.2		1.1		143.6		159.7		143.7
		19.2		19.8		19.8		361.7		355.8		332.0

Future minimum annual amounts payable under all lease commitments in existence at 31 December 2011 are as follows:

	Minimum rental payments £m		Less sub- let rentals £m			Net payment £m
Year ending 31 December
2012		380.9		(19.5	)		361.4
2013		328.5		(11.6	)		316.9
2014		282.0		(3.5	)		278.5
2015		248.0		(3.0	)		245.0
2016		204.2		(1.7	)		202.5
Later years		931.9		(1.2	)		930.7
		2,375.5		(40.5	)		2,335.0

F-15

Notes to the consolidated financial statements (continued)

4. Share of results of associates

Share of results of associates include:

	2011 £m			2010 £m			2009 £m
Share of profit before interest and taxation		99.9			86.0			86.3
Share of exceptional gains/(losses)		2.1			(0.3	)		(1.6	)
Share of interest and non-controlling interests		(2.5	)		(2.7	)		(0.7	)
Share of taxation		(33.4	)		(27.8	)		(27.0	)
		66.1			55.2			57.0

5. Our people

Our staff numbers averaged 109,971 against 101,387 in 2010 and 105,318 in 2009, including acquisitions. Their geographical distribution was as follows:

	2011		2010		2009
North America		27,540		25,546		25,004
UK		10,555		9,620		9,704
Western Continental Europe		22,504		21,154		22,230
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		49,372		45,067		48,380
		109,971		101,387		105,318

Their operating sector distribution was as follows:

	2011		2010		2009
Advertising and Media Investment Management		47,252		42,424		42,906
Consumer Insight		29,204		28,167		28,325
Public Relations & Public Affairs		7,869		7,364		7,325
Branding & Identity, Healthcare and Specialist Communications		25,646		23,432		26,762
		109,971		101,387		105,318

At the end of 2011 staff numbers were 113,615 (2010: 104,052, 2009: 98,759). Including all employees of associated undertakings, this figure was approximately 158,000 at 31 December 2011 (2010: 146,000, 2009: 138,000).

Staff costs include:

	2011 £m		2010 £m		2009 £m
Wages and salaries		4,079.4		3,696.8		3,614.1
Cash-based incentive plans		259.4		271.9		122.9
Share-based incentive plans (note 22)		78.8		70.4		54.9
Social security costs		499.3		450.1		442.5
Pension costs (note 23)		135.4		120.6		116.4
Other staff costs1		820.2		828.9		766.2
		5,872.5		5,438.7		5,117.0
Staff cost to revenue ratio		58.6%		58.3%		58.9%

Note

¹  Freelance and temporary staff costs are included in other staff costs.

Included above are charges of £7.3 million (2010: £7.7 million, 2009: £6.1 million) for share-based incentive plans in respect of key management personnel (who comprise the directors of the Group). Total compensation received by key management personnel in 2011 was £20.7 million (2010: £14.3 million, 2009: £5.7 million) of which £0.8 million (2010: £0.7 million, 2009: £0.7 million) were pension contributions.

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

Finance income includes:

	2011 £m		2010 £m		2009 £m
Expected return on pension plan assets (note 23)		32.6		30.6		28.7
Income from available for sale investments		0.6		9.3		10.2
Interest income		64.1		41.8		111.5
		97.3		81.7		150.4

Finance costs include:

	2011 £m		2010 £m		2009 £m
Interest on pension plan liabilities (note 23)		43.8		45.9		46.1
Interest on other long-term employee benefits		1.8		1.9		1.3
Interest payable and similar charges1		251.6		229.0		308.0
		297.2		276.8		355.4

Revaluation of financial instruments²include:

	2011 £m			2010 £m			2009 £m
Movements in fair value of treasury instruments		(12.7	)		21.8			8.4
Revaluation of put options over non-controlling interests		(30.9	)		(3.6	)		15.3
Revaluation of payments due to vendors		(6.4	)		–			–
Gains on termination of hedge accounting on repayment of TNS debt		–			–			25.2
		(50.0	)		18.2			48.9

Notes

¹  Interest payable and similar charges are payable on bank overdrafts, bonds and bank loans held at amortised cost.

²  Financial instruments are held at fair value through profit and loss.

The majority of the Group’s long-term debt is represented by $1,781 million of US dollar bonds at an average interest rate of 6.08% (prior to any interest rate swaps or cross-currency swaps),€1,850 million of Eurobonds at an average interest rate of 5.52% (prior to any interest rate or currency swaps) and £1,050 million of sterling bonds including convertible bonds at an average interest rate of 5.96%.

Average borrowings under the Revolving Credit Facilities (note 10) amounted to the equivalent of $711 million at an average interest rate of 0.92% inclusive of margin.

7. Taxation

In 2011, the tax rate on reported PBT was 9.1% (2010: 22.4%).

The tax rate decreased significantly due to the resolution of historic tax liabilities and deferred tax credits related to the accounting for acquired intangibles with definite lives. The release of prior year corporate tax provisions resulted from the resolution of a number of open matters.

Cash taxes paid in the year were £247.9 million (2010: £207.4 million).

F-16

Notes to the consolidated financial statements (continued)

7. Taxation (continued)

The tax charge is based on the profit for the year and comprises:

	2011 £m			2010 £m			2009 £m
Corporation tax
Current year		310.3			276.2			209.8
Prior years		(47.7	)		(1.0	)		(1.7	)
Release of prior year provisions		(106.1	)		–			–
		156.5			275.2			208.1
Deferred tax
Current year		4.5			(21.4	)		(16.1	)
Net credit in relation to the amortisation of acquired intangible assets and other goodwill items		(72.4	)		(37.5	)		(37.3	)
		(67.9	)		(58.9	)		(53.4	)
Prior years		3.3			(26.0	)		1.0
		(64.6	)		(84.9	)		(52.4	)
Tax charge		91.9			190.3			155.7

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

	2011 £m			2010 £m			2009 £m
Profit before taxation		1,008.4			851.3			662.6
Tax at the corporation tax rate of 25%1		252.1			212.8			165.7
Tax effect of share of results of associates		(16.5	)		(13.8	)		(14.3	)
Tax effect of items that are not deductible/(taxable)		13.0			(7.8	)		(63.7	)
Effect of different tax rates of subsidiaries operating in other jurisdictions		9.2			15.4			23.7
Losses carried forward and temporary differences not recognised		69.5			58.2			55.1
Tax effect of utilisation or recognition of tax losses not previously recognised		(84.9	)		(47.5	)		(10.1	)
Release of prior year provisions in relation to acquired businesses		(21.4	)		(19.7	)		(19.3	)
Other prior year adjustments		(23.0	)		(7.3	)		18.6
Release of prior year provisions		(106.1	)		–			–
Tax charge		91.9			190.3			155.7
Effective tax rate on profit before tax		9.1	%		22.4	%		23.5	%

Note

¹  Irish non-trading corporation tax rate.

8. Ordinary dividends

Amounts recognised as distributions to equity holders in the year:

	2011			2010			2009			2011		2010		2009
Per share	Pence per share									£m		£m		£m
2010 Second interim dividend		11.82	p		10.28	p		10.28	p		147.3		126.6		126.1
2011 First interim dividend		7.46	p		5.97	p		5.19	p		92.2		73.8		63.7
		19.28	p		16.25	p		15.47	p		239.5		200.4		189.8

8. Ordinary dividends (continued)

The Company operates a scrip dividend scheme which enables share owners to receive new fully paid ordinary shares in the Company instead of cash dividends. Included in the £239.5 million dividends recognised in 2011 are cash dividends of £218.4 million and scrip dividends of £21.1 million.

Second interim dividend for the year ended 31 December 2011:

	2011			2010			2009
Per share	Pence per share
2011 Second interim dividend		17.14	p		11.82	p		10.28	p

The payment of dividends will not have any tax consequences for the Group.

9. Earnings per share

Basic EPS

The calculation of basic EPS is as follows:

	2011			2010			2009
Earnings1(£m)		840.1			586.0			437.7
Average shares used in basic EPS calculation (m)		1,242.7			1,233.1			1,218.7
EPS		67.6	p		47.5	p		35.9	p

Note

¹  Earnings is equivalent to profit for the year attributable to equity holders of the parent.

Diluted EPS

The calculation of diluted EPS is as follows:

	2011			2010			2009
Diluted earnings (£m)		866.2			614.3			437.7
Average shares used in diluted EPS calculation (m)		1,342.2			1,339.0			1,238.2
Diluted EPS		64.5	p		45.9	p		35.3	p

Diluted EPS has been calculated based on the diluted earnings amounts above. On 19 May 2009 the Group issued £450 million 5.75% convertible bonds due May 2014. For the year ended 31 December 2011 these convertible bonds were dilutive and earnings were consequently increased by £26.1 million (2010: £28.3 million) for the purpose of the calculation of diluted earnings. For the year ended 31 December 2009 these convertible bonds were accretive to earnings and therefore excluded from this calculation. In addition, at 31 December 2011, options to purchase 4.0 million ordinary shares (2010: 11.6 million, 2009: 33.2 million) were outstanding, but were excluded from the computation of diluted earnings per share because the exercise prices of these options were greater than the average market price of the Group’s shares and, therefore, their inclusion would have been accretive.

A reconciliation between the shares used in calculating basic and diluted EPS is as follows:

	2011 m		2010 m		2009 m
Average shares used in basic EPS calculation		1,242.7		1,233.1		1,218.7
Dilutive share options outstanding		4.5		6.7		2.1
Other potentially issuable shares		18.5		22.7		17.4
£450 million 5.75% convertible bonds		76.5		76.5		–
Shares used in diluted EPS calculation		1,342.2		1,339.0		1,238.2

At 31 December 2011 there were 1,266,373,821 ordinary shares in issue.

F-17

Notes to the consolidated financial statements (continued)

10. Sources of finance

The following table summarises the equity and debt financing of the Group, and changes during the year:

				Shares					Debt
	2011 £m			2010 £m		2011 £m			2010 £m
Analysis of changes in financing
Beginning of year		180.9			138.2		3,598.2			3,586.4
Other ordinary shares issued		31.0			42.7		–			–
Share cancellations		(0.7	)		–		–			–
Scrip dividend		21.1			–		–			–
Net increase in drawings on bank loans, corporate bonds and convertible bonds		–			–		301.4			19.8
Net amortisation of financing costs included in debt		–			–		7.6			13.6
Debt acquired		–			–		17.5			–
Other movements		–			–		(2.7	)		0.5
Exchange adjustments		–			–		(29.0	)		(22.1	)
End of year		232.3			180.9		3,893.0			3,598.2

Note

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

Shares

At 31 December 2011, the Company’s share base was entirely composed of ordinary equity share capital and share premium of £232.3 million (2010: £180.9 million), further details of which are disclosed in note 26.

Debt

US$ bonds The Group has in issue $600 million of 8% bonds due September 2014. In November 2011, the Group issued $812 million of 4.75% bonds due November 2021. $312 million of these bonds were issued in exchange for $281 million of the 5.875% bonds due June 2014. Consequently the amount in issue of the 5.875% bonds due June 2014 has reduced to $369 million.

Eurobonds The Group has in issue€600 million of 4.375% bonds due December 2013,€500 million of 5.25% bonds due January 2015 and€750 million of 6.625% bonds due May 2016.

Sterling bonds The Group has in issue £400 million of 6% bonds due April 2017 and £200 million of 6.375% bonds due November 2020.

Revolving Credit Facilities The Group has a five-year Revolving Credit Facility of $1.05 billion and £375 million due November 2016, signed in November 2011. Prior to this the Group had a Revolving Credit Facility of $1.6 billion signed in August 2005. The Group’s borrowing under these facilities, which are drawn down predominantly in US dollars, euros, Canadian dollars and pounds sterling, averaged the equivalent of $711 million in 2011. The Group had available undrawn committed credit facilities of £972 million at December 2011 (2010: £1,145 million).

Borrowings under the Revolving Credit Facilities are governed by certain financial covenants based on the results and financial position of the Group.

US Commercial Paper Program

The Group operates a commercial paper program using the Revolving Credit Facility as a backstop. There was no US Commercial Paper outstanding at 31 December 2011.

Convertible bonds

The Group has in issue £450 million of 5.75% convertible bonds due May 2014. At the option of the holder, the bonds are convertible into 76,530,612 WPP ordinary shares at an initial share price of £5.88 per share.

The convertible bonds have a nominal value of £450 million at 31 December 2011. In accordance with IAS 39, these bonds have been split between a liability component and an equity component by initially valuing the liability component at fair value based on the present value of future cash flows and then holding it at amortised cost. This fair value has been calculated assuming redemption in May 2014 and using a discount rate of 8.25%, based on the estimated rate of interest that would have applied to a comparable bond issued at that time without the convertible option. The equity component represents the fair value, on initial recognition, of the embedded option to convert the liability into equity of the Group.

10. Sources of finance (continued)

The liability element is £424.1 million and the equity component is £44.5 million as at 31 December 2011.

The Group estimates that the fair value of the liability component of the convertible bonds at 31 December 2011 was approximately £448.9 million. This fair value has been calculated by discounting the future cash flows at the market rate.

The following table is an analysis of future anticipated cash flows in relation to the Group’s debt, on an undiscounted basis which, therefore, differs from the fair value and carrying value:

	2011 £m			2010 £m
Within one year		(240.8	)		(209.4	)
Between one and two years		(722.2	)		(308.7	)
Between two and three years		(1,259.3	)		(721.1	)
Between three and four years		(524.7	)		(1,416.3	)
Between four and five years		(787.1	)		(509.8	)
Over five years		(1,304.1	)		(1,355.4	)
Debt financing under the Revolving Credit Facility and in relation to unsecured loan notes		(4,838.2	)		(4,520.7	)
Short-term overdrafts – within one year		(518.4	)		(255.4	)
Future anticipated cash flows		(5,356.6	)		(4,776.1	)
Effect of discounting/financing rates		945.2			922.5
Debt financing		(4,411.4	)		(3,853.6	)

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

2011 Currency		£m			Fixed rate1		Floating basis		Period (months)1
$	– fixed		1,494.1			6.00%		n/a		63
	– floating		477.9			n/a		LIBOR		n/a
£	– fixed		550.0			6.07%		n/a		70
	– floating		200.0			n/a		LIBOR		n/a
€	– fixed		710.3			6.50%		n/a		50
	– floating		354.0			n/a		EURIBOR		n/a
¥	– fixed		75.4			2.07%		n/a		24
$C2	– floating		79.7			n/a		LIBOR		n/a
Other			(48.4	)		n/a		n/a		n/a
			3,893.0

2010 Currency		£m			Fixed rate1		Floating basis		Period (months)1
$	– fixed		1,338.0			6.54%		n/a		44
	– floating		283.0			n/a		LIBOR		n/a
£	– fixed		550.0			6.07%		n/a		83
	– floating		200.0			n/a		LIBOR		n/a
€	– fixed		728.7			6.50%		n/a		63
	– floating		363.1			n/a		EURIBOR		n/a
¥	– fixed		71.1			2.07%		n/a		36
$C2	– floating		81.1			n/a		LIBOR		n/a
Other			(16.8	)		n/a		n/a		n/a
			3,598.2

Notes

¹  Weighted average. These rates do not include the effect of gains on interest rate swap terminations that are written to income over the life of the original instrument. At 31 December 2011 the amount still to be written to income was £1.2 million (2010: £1.7 million) in respect of US dollar swap terminations, to be written to income evenly until June 2014.

²  Represents Canadian dollars.

The following table is an analysis of future anticipated cash flows in relation to the Group’s financial derivatives, which include interest rate swaps, cash flow hedges and other foreign exchange swaps:

F-18

Notes to the consolidated financial statements (continued)

10. Sources of finance (continued)

2011	Financial liabilities				Financial assets
	Payable £m		Receivable £m		Payable £m		Receivable £m
Within one year		60.5		52.3		167.5		214.3
Between one and two years		328.1		233.3		771.7		869.8
Between two and three years		356.5		284.9		785.1		867.6
Between three and four years		478.5		353.2		537.4		633.9
Between four and five years		1.1		0.6		4.2		37.4
Over five years		26.1		25.5		227.3		237.4
		1,250.8		949.8		2,493.2		2,860.4

2010	Financial liabilities				Financial assets
	Payable £m		Receivable £m		Payable £m		Receivable £m
Within one year		74.1		46.3		160.0		205.4
Between one and two years		36.6		29.2		85.7		123.5
Between two and three years		335.2		241.1		758.8		847.0
Between three and four years		368.7		291.0		804.8		877.8
Between four and five years		480.6		355.8		556.5		656.4
Over five years		27.1		27.1		457.3		488.4
		1,322.3		990.5		2,823.1		3,198.5

Included in these amounts are anticipated cash flows in relation to cash flow hedges.

11. Analysis of cash flows

The following tables analyse the items included within the main cash flow headings on page F-10.

Net cash from operating activities:

	2011 £m			2010 £m			2009 £m
Profit for the year		916.5			661.0			506.9
Taxation		91.9			190.3			155.7
Revaluation of financial instruments		50.0			(18.2	)		(48.9	)
Finance costs		297.2			276.8			355.4
Finance income		(97.3	)		(81.7	)		(150.4	)
Share of results of associates		(66.1	)		(55.2	)		(57.0	)
Adjustments for:
Non-cash share-based incentive plans (including share options)		78.8			70.4			54.9
Depreciation of property, plant and equipment		185.8			184.9			195.3
Impairment of goodwill		–			10.0			44.3
Amortisation and impairment of acquired intangible assets		172.0			170.5			172.6
Amortisation of other intangible assets		25.7			25.4			30.5
Investment write-downs		32.8			37.5			11.1
Gains on disposal of investments		(0.4	)		(4.1	)		(31.1	)
Gains on re-measurement of equity interest on acquisition of controlling interest		(31.6	)		(13.7	)		–
(Gains)/losses on sale of property, plant and equipment		(0.9	)		0.7			0.4
Decrease/(increase) in inventories and work in progress		32.7			(46.3	)		12.4
Increase in receivables		(1.8	)		(850.8	)		(90.0	)
(Decrease)/increase in payables – short term		(618.5	)		1,135.7			(51.3	)
Increase in payables – long term		19.2			10.3			25.5
(Decrease)/increase in provisions		(52.5	)		(23.4	)		1.3
Corporation and overseas tax paid	(247.9)			(207.4)			(216.6)
Interest and similar charges paid	(241.4)			(219.7)			(248.7)
Interest received	63.2			50.7			99.6
Investment income	0.6			4.2			1.4
Dividends from associates	57.2			53.3			45.5
Net cash inflow from operating activities	665.2			1,361.2			818.8

F-19

Notes to the consolidated financial statements (continued)

11. Analysis of cash flows (continued)

Acquisitions and disposals:

	2011 £m			2010 £m			2009 £m
Initial cash consideration		(352.3	)		(138.6	)		(35.4	)
Cash and cash equivalents acquired (net)		98.8			57.0			1.3
Earnout payments		(150.0	)		(113.3	)		(81.5	)
Loan note redemptions		(0.8	)		(5.1	)		–
Purchase of other investments (including associates)		(68.1	)		(23.8	)		(53.3	)
Proceeds on disposal of investments		2.6			23.7			50.5
Acquisitions and disposals		(469.8	)		(200.1	)		(118.4	)
Cash consideration for non-controlling interests		(62.6	)		(15.1	)		(26.4	)
Net cash outflow		(532.4	)		(215.2	)		(144.8	)
Share repurchases and buy-backs:
	2011 £m			2010 £m			2009 £m
Purchase of own shares by ESOP Trusts		(106.5	)		(46.4	)		–
Share cancellations (excluding brokerage fees)		(45.9	)		–			–
Shares purchased into treasury		(29.8	)		–			(9.5	)
Net cash outflow	(182.2)			(46.4)			(9.5)
Net increase/(decrease) in borrowings:
	2011 £m			2010 £m			2009 £m
Proceeds from issue of $500 million bonds		319.5			–			–
Repayment of debt acquired		(18.1	)		–			–
Increase/(decrease) in drawings on bank loans		–			19.8			(1,068.0	)
Proceeds from issue of $450 million bonds		–			–			450.0
Proceeds from issue of $600 million bonds		–			–			367.4
Repayment of TNS debt		–			–			(175.7	)
Net cash inflow/(outflow)		301.4			19.8			(426.3	)
Cash and cash equivalents:
	2011 £m			2010 £m			2009 £m
Cash at bank and in hand		1,833.5			1,877.1			1,570.5
Short-term bank deposits		113.1			88.1			96.2
Overdrafts1		(518.4	)		(255.4	)		(720.7	)
Cash and cash equivalents at end of year		1,428.2			1,709.8			946.0

Note

¹  Bank overdrafts are included in cash and cash equivalents because they form an integral part of the Group’s cash management.

The Group considers that the carrying amount of cash and cash equivalents approximates their fair value.

12. Intangible assets

Goodwill

The movements in 2011 and 2010 were as follows:

	£m
Cost:
1 January 2010		9,246.8
Additions1		164.3
Revision of earnout estimates		82.0
Exchange adjustments		185.7
31 December 2010		9,678.8
Additions1		434.6
Revision of earnout estimates		25.9
Exchange adjustments		(150.8	)
31 December 2011		9,988.5
Accumulated impairment losses and write-downs:
1 January 2010		549.3
Impairment losses for the year		8.3
Exchange adjustments		14.9
31 December 2010		572.5
Exchange adjustments		(14.8	)
31 December 2011		557.7
Net book value:
31 December 2011		9,430.8
31 December 2010		9,106.3
1 January 2010		8,697.5

Note

¹  Additions represent goodwill arising on the acquisition of subsidiary undertakings including the effect of any revisions to fair value adjustments that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 (revised) Business Combinations. The effect of such revisions was not material in either year presented. Goodwill arising on the acquisition of associate undertakings is shown within interests in associates and joint ventures in note 14.

Cash-generating units with significant goodwill as at 31 December 2011 and 2010 are:

	2011 £m		2010 £m
GroupM		2,037.7		2,105.0
Kantar		1,791.2		1,740.0
Wunderman		1,119.9		1,143.8
Y&R Advertising		1,025.5		1,092.7
Burson-Marsteller		489.8		545.9
Other		2,966.7		2,478.9
Total goodwill		9,430.8		9,106.3

Other goodwill represents goodwill on a large number of cash-generating units, none of which is individually significant in comparison to the total carrying value of goodwill.

F-20

Notes to the consolidated financial statements (continued)

12. Intangible assets (continued)

Other intangible assets

The movements in 2011 and 2010 were as follows:

	Brands with an indefinite useful life £m			Acquired intangibles £m			Other £m			Total £m
Cost:
1 January 2010		1,013.2			1,297.0			211.8			2,522.0
Additions		–			–			27.0			27.0
Disposals		–			–			(14.2	)		(14.2	)
New acquisitions		–			25.5			0.7			26.2
Other movements		–			1.1			4.0			5.1
Exchange adjustments		40.5			8.9			0.6			50.0
31 December 2010		1,053.7			1,332.5			229.9			2,616.1
Additions		–			–			37.1			37.1
Disposals		–			–			(11.7	)		(11.7	)
New acquisitions		–			117.6			2.0			119.6
Other movements1		–			21.2			1.5			22.7
Exchange adjustments		(17.3	)		(7.7	)		(5.0	)		(30.0	)
31 December 2011		1,036.4			1,463.6			253.8			2,753.8
Amortisation and impairment:
1 January 2010		–			377.5			143.8			521.3
Charge for the year		–			170.5			25.4			195.9
Disposals		–			–			(14.0	)		(14.0	)
Other movements		–			(2.4	)		2.3			(0.1	)
Exchange adjustments		–			5.2			3.3			8.5
31 December 2010		–			550.8			160.8			711.6
Charge for the year		–			172.0			25.7			197.7
Disposals		–			–			(11.3	)		(11.3	)
Other movements		–			(2.6	)		(1.0	)		(3.6	)
Exchange adjustments		–			2.0			(2.5	)		(0.5	)
31 December 2011		–			722.2			171.7			893.9
Net book value:
31 December 2011		1,036.4			741.4			82.1			1,859.9
31 December 2010		1,053.7			781.7			69.1			1,904.5
1 January 2010		1,013.2			919.5			68.0			2,000.7

Note

¹  Other movements in acquired intangibles include revisions to fair value adjustments arising on the acquisition of subsidiary undertakings that had been determined provisionally at the immediately preceding balance sheet date, as permitted by IFRS 3 (revised) Business Combinations.

Brands with an indefinite life are carried at historical cost in accordance with the Group accounting policy for intangible assets. The carrying values of the separately identifiable brands are not individually significant in comparison with the total carrying value of brands with an indefinite useful life.

12. Intangible assets (continued)

Acquired intangible assets at net book value at 31 December 2011 include brand names of £371.9 million (2010: £357.4 million), customer-related intangibles of £294. 1 million (2010: £327. 3 million), and other assets (including proprietary tools) of £75.4 million (2010: £97.0 million).

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

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

The 2011 goodwill impairment review was initially undertaken as at 30 June 2011 and then updated as at 31 December 2011. The review assessed whether the carrying value of goodwill was supported by the net present value of future cash-flows, using a pre-tax discount rate of 9.50% (2010: 9.58%) and management forecasts for a projection period of up to five years, followed by an assumed annual long-term growth rate of 3.0% (2010: 3.0%) and no assumed improvement in operating margin. Management have made the judgement that this long-term growth rate does not exceed the long-term average growth rate for the industry.

There was no goodwill impairment charge recorded for the year ended 31 December 2011 (2010: £10.0 million). In 2010 the impairment charge related to certain under-performing businesses in the Group. In certain markets, the impact of local economic conditions and trading circumstances on these businesses was sufficiently severe to indicate impairment to the carrying value of goodwill.

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

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

F-21

Notes to the consolidated financial statements (continued)

13. Property, plant and equipment

The movements in 2011 and 2010 were as follows:

	Land £m		Freehold buildings £m			Lease- hold buildings £m			Fixtures, fittings and equip- ment £m			Computer equip- ment £m			Total £m
Cost:
1 January 2010		12.4		73.2			619.1			362.6			535.4			1,602.7
Additions		–		0.7			71.5			35.6			82.7			190.5
New acquisitions		–		–			2.1			2.6			4.4			9.1
Disposals		–		(0.5	)		(43.0	)		(37.0	)		(60.7	)		(141.2	)
Exchange adjustments		–		–			23.0			12.2			19.3			54.5
31 December 2010		12.4		73.4			672.7			376.0			581.1			1,715.6
Additions		–		0.6			76.2			43.1			96.2			216.1
New acquisitions		–		–			2.5			4.6			6.9			14.0
Disposals		–		(0.9	)		(33.2	)		(41.0	)		(57.8	)		(132.9	)
Exchange adjustments		–		–			(4.3	)		(13.0	)		(14.2	)		(31.5	)
31 December 2011		12.4		73.1			713.9			369.7			612.2			1,781.3
Depreciation:
1 January 2010		–		25.8			278.0			214.3			404.1			922.2
Charge for the year		–		2.7			58.2			42.9			81.1			184.9
Disposals		–		(0.5	)		(37.6	)		(35.9	)		(58.7	)		(132.7	)
Exchange adjustments		–		–			13.1			7.0			12.7			32.8
31 December 2010		–		28.0			311.7			228.3			439.2			1,007.2
Charge for the year		–		3.2			58.3			42.9			81.4			185.8
Disposals		–		(0.3	)		(24.9	)		(37.7	)		(55.0	)		(117.9	)
Exchange adjustments		–		(1.4	)		(2.0	)		(7.9	)		(10.8	)		(22.1	)
31 December 2011		–		29.5			343.1			225.6			454.8			1,053.0
Net book value:
31 December 2011		12.4		43.6			370.8			144.1			157.4			728.3
31 December 2010		12.4		45.4			361.0			147.7			141.9			708.4
1 January 2010		12.4		47.4			341.1			148.3			131.3			680.5

At the end of the year, capital commitments contracted, but not provided for in respect of property, plant and equipment were £127.4 million (2010: £40.7 million). The increase is due to a number of significant property development projects in North America.

14. Interests in associates, joint ventures and other investments

The movements in 2011 and 2010 were as follows:

	Net assets of associates and joint ventures £m			Goodwill and other intangibles of associates and joint ventures £m			Total associates and joint ventures £m			Other invest- ments £m
1 January 2010		337.1			392.2			729.3			294.6
Additions		8.0			–			8.0			20.2
Goodwill arising on acquisition of new associates		–			5.6			5.6			–
Share of results of associate undertakings (note 4)		55.2			–			55.2			–
Dividends and other movements		(52.7	)		(0.9	)		(53.6	)		–
Exchange adjustments		35.9			36.9			72.8			(24.0	)
Disposals		–			–			–			(22.0	)
Reclassification to subsidiaries		(8.5	)		(10.4	)		(18.9	)		–
Revaluation of other investments		–			–			–			(59.8	)
Goodwill impairment		–			(1.7	)		(1.7	)		–
Amortisation of other intangible assets		–			(2.4	)		(2.4	)		–
Write-downs		(2.2	)		–			(2.2	)		(35.3	)
31 December 2010		372.8			419.3			792.1			173.7
Additions		39.3			–			39.3			29.3
Goodwill arising on acquisition of new associates		–			3.4			3.4			–
Share of results of associate undertakings (note 4)		66.1			–			66.1			–
Dividends and other movements		(67.3	)		18.3			(49.0	)		–
Exchange adjustments		(0.7	)		(4.8	)		(5.5	)		–
Reclassification (to)/from subsidiaries		(16.0	)		(25.0	)		(41.0	)		7.3
Revaluation of other investments		–			–			–			11.3
Amortisation of other intangible assets		–			(2.1	)		(2.1	)		–
Write-downs		(2.0	)		–			(2.0	)		(30.8	)
31 December 2011		392.2			409.1			801.3			190.8

The investments included above as ‘other investments’ represent investments in equity securities that present the Group with opportunity for return through dividend income and trading gains. They have no fixed maturity or coupon rate. The fair values of the listed securities are based on quoted market prices. For unlisted securities, where market value is not available, the Group has estimated relevant fair values on the basis of publicly available information from outside sources or on the basis of discounted cash flow models where appropriate.

The carrying values of the Group’s associates and joint ventures are reviewed for impairment in accordance with the Group’s accounting policies.

F-22

Notes to the consolidated financial statements (continued)

14. Interests in associates, joint ventures and other investments (continued)

The Group’s principal associates and joint ventures at 31 December 2011 included:

	% owned		Country of incorporation
Asatsu-DK		24.3		Japan
CHI & Partners Limited		49.9		UK
Chime Communications PLC1		17.5		UK
CTR Market Research Co., Ltd		46.0		China
Dentsu, Young & Rubicam Inc		49.0		Japan
GIIR, Inc		27.9		Korea
High Co S.A.		34.1		France
Ibope Latinoamericana SA		41.8		Brazil
oOh!media Group Limited		23.8		Australia
Scangroup Limited		31.8		Kenya
Singleton, Ogilvy & Mather (Holdings) Pty Limited		33.3		Australia
Smollan Holdings (Proprietary) Limited		33.0		South Africa
STW Communications Group Limited		20.6		Australia
The Grass Roots Group PLC		44.8		UK
The Jupiter Drawing Room Pty Limited		49.0		South Africa

Note

¹  Although the Group holds less than 20% of Chime Communications PLC, it is considered to be an associate as the Group exercises significant influence by virtue of a position on the Board of Directors.

The market value of the Group’s shares in its principal listed associate undertakings at 31 December 2011 was as follows: Asatsu-DK: £175.0 million, Chime Communications PLC: £20.8 million, High Co S.A.: £16.9 million, GIIR, Inc: £22.9 million, Scangroup Limited: £19.2 million, STW Communications Group Limited: £41.7 million and oOh!media Group Limited: £24.8 million (2010: Asatsu-DK: £180.9 million, Chime Communications PLC: £22.6 million, High Co S.A.: £30.0 million, GIIR, Inc.: £22.4 million, Scangroup Limited: £30.0 million, STW Communications Group Limited: £52.2 million and oOh!media Group Limited: £22.3 million).

The carrying value (including goodwill and other intangibles) of these equity interests in the Group’s consolidated balance sheet at 31 December 2011 was as follows: Asatsu-DK: £229.4 million, Chime Communications PLC: £29.4 million, High Co S.A.: £32.4 million, GIIR, Inc: £24.0 million, Scangroup Limited: £20.4 million, STW Communications Group Limited: £68.3 million and oOh!media Group Limited: £20.5 million (2010: Asatsu-DK: £220.7 million, Chime Communications PLC: £23.0 million, High Co S.A.: £30.9 million, GIIR, Inc: £18.7 million, Scangroup Limited: £17.1 million, STW Communications Group Limited: £69.4 million and oOh!media Group Limited: £17.9 million).

Where the market value of the Group’s listed associates is less than the carrying value, an impairment review is performed utilising the discounted cash flow methodology discussed in note 12.

The Group’s investments in its principal associate undertakings are represented by ordinary shares.

14. Interests in associates, joint ventures and other investments (continued)

Summarised financial information

The following tables present a summary of the aggregate financial performance and net asset position of the Group’s associate undertakings and joint ventures. These have been estimated and converted, where appropriate, to an IFRS presentation based on information provided by the relevant companies at 31 December 2011.

	2011 £m		2010 £m		2009 £m
Income statement
Revenue		2,127.2		2,142.3		1,968.9
Operating profit		293.7		229.9		219.2
Profit before taxation		316.5		245.1		237.0
Profit for the year		190.5		179.1		166.0

	2011 £m			2010 £m
Balance sheet
Assets		4,388.2			4,355.7
Liabilities		(2,191.8	)		(2,394.1	)
Net assets		2,196.4			1,961.6

The application of equity accounting is ordinarily discontinued when the investment is reduced to zero and additional losses are not provided for unless the investor has guaranteed obligations of the investee or is otherwise committed to provide further financial support for the investee.

At the end of the year, capital commitments contracted, but not provided for in respect of interests in associates and other investments were £40.0 million (2010: £24.9 million).

15. Deferred tax

The Group’s deferred tax assets and liabilities are measured at the end of each period in accordance with IAS 12. The recognition of deferred tax assets is determined by reference to the Group’s estimate of recoverability, using models where appropriate to forecast future taxable profits.

Deferred tax assets are recognised in relation to an element of the Group’s defined benefit pension provisions and share based payment schemes. Assets have only been recognised for territories where the Group considers that it is probable there would be sufficient taxable profits for the future deductions to be utilised.

Based on available evidence, both positive and negative, we determine whether it is probable that all or a portion of the deferred tax assets will be realised. The main factors that we consider include:

– the future earnings potential determined through the use of internal forecasts;

– the cumulative losses in recent years;

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

– the history of losses carried forward and other tax assets expiring;

– the timing of future reversal of taxable temporary differences;

– the expiry period associated with the deferred tax assets; and

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

If it is probable that some portion of these assets will not be realised, then no asset is recognised in relation to that portion.

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

F-23

Notes to the consolidated financial statements (continued)

15. Deferred tax (continued)

Certain deferred tax assets and liabilities have been offset as they relate to the same tax group. The following is the analysis of the deferred tax balances for financial reporting purposes:

	Gross £m			Offset £m			As reported £m
2011
Deferred tax assets		151.4			(65.4	)		86.0
Deferred tax liabilities		(806.8	)		65.4			(741.4	)
		(655.4	)		–			(655.4	)
2010
Deferred tax assets		137.6			(58.5	)		79.1
Deferred tax liabilities		(809.2	)		58.5			(750.7	)
		(671.6	)		–			(671.6	)

The following are the major gross deferred tax assets recognised by the Group and movements thereon in 2011 and 2010:

	Tax losses £m			Retirement benefit obligations £m			Deferred comp- ensation £m			US stock plans £m			Other short-term temporary differences £m			Total £m
1 January 2010		8.2			12.4			7.3			–			47.7			75.6
(Charge)/credit to income		(1.9	)		0.5			(1.8	)		30.6			18.0			45.4
Credit to equity		–			0.2			–			19.0			0.2			19.4
Exchange adjustments		–			–			–			–			3.3			3.3
Transfer to current tax		–			–			–			–			(6.1	)		(6.1	)
31 December 2010		6.3			13.1			5.5			49.6			63.1			137.6
Acquisition of subsidiaries		0.7			–			–			–			–			0.7
Credit/(charge) to income		24.4			–			(5.0	)		(2.8	)		9.6			26.2
Credit/(charge) to equity		–			0.5			–			(11.8	)		(0.3	)		(11.6	)
Exchange adjustments		0.2			(0.1	)		0.2			(0.3	)		(1.5	)		(1.5	)
31 December 2011		31.6			13.5			0.7			34.7			70.9			151.4

Other short-term temporary differences comprise a number of items, none of which is individually significant to the Group’s consolidated balance sheet. At 31 December 2011 the balance related to temporary differences in relation to accounting provisions, tax credits, fixed assets, and tax deductible goodwill.

The Group incurred losses in certain jurisdictions in the current year. No deferred tax assets in excess of taxable temporary differences (2010: £10.5 million) have been recognised in these jurisdictions.

In addition the Group has recognised the following gross deferred tax liabilities and movements thereon in 2011 and 2010:

	Brands and other intangibles £m			Associate earnings £m		Goodwill £m		Other short-term temporary differences £m			Total £m
1 January 2010		711.9			20.2		74.8		10.8			817.7
Acquisition of subsidiaries		9.4			–		–		–			9.4
(Credit)/charge to income		(52.5	)		0.3		14.9		(2.2	)		(39.5	)
Exchange adjustments		19.3			0.7		2.7		–			22.7
Transfer to current tax		–			–		–		(1.1	)		(1.1	)
31 December 2010		688.1			21.2		92.4		7.5			809.2
Acquisition of subsidiaries1		44.9			–		–		–			44.9
(Credit)/charge to income		(60.8	)		1.3		17.7		3.4			(38.4	)
Exchange adjustments		(9.7	)		0.4		0.4		–			(8.9	)
31 December 2011		662.5			22.9		110.5		10.9			806.8

Note

¹  Acquisition of subsidiaries includes deferred tax liabilities of £37.2 million for acquisitions completed in 2011 as well as adjustments of £7.7 million to deferred tax liabilities for acquisitions in the prior year.

15. Deferred tax (continued)

At the balance sheet date, the Group has gross tax losses and other temporary differences of £4,996.0 million (2010: £5,212.9 million) available for offset against future profits. Deferred tax assets have been recognised in respect of the tax benefit of £439.0 million (2010: £377.9 million) of such tax losses and other temporary differences. No deferred tax asset has been recognised in respect of the remaining £4,557.0 million (2010: £4,834.9 million) of losses and other temporary differences as the Group considers that there will not be enough taxable profits in the entities concerned such that any additional asset could be considered recoverable. Included in the total unrecognised temporary differences are losses of £259.3 million that will expire by 2021, £222.8 million that will expire by 2023, £9.7 million that will expire by 2025, £13.4 million that will expire by 2027 and an additional £62.3 million that will expire by 2029. £2, 895.9 million of losses may be carried forward indefinitely.

At the balance sheet date, the aggregate amount of the temporary differences in relation to the investment in subsidiaries for which deferred tax liabilities have not been recognised was £12,728.3 million (2010: £11,462.1 million). No liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and the Group considers that it is probable that such differences will not reverse in the foreseeable future.

16. Inventory and work in progress

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

	2011 £m		2010 £m
Work in progress		327.0		362.6
Inventory		6.9		3.4
		333.9		366.0

17. Trade and other receivables

The following are included in trade and other receivables:

Amounts falling due within one year:

	2011 £m		2010 £m
Trade receivables		6,305.1		6,280.6
VAT and sales taxes recoverable		76.2		72.1
Prepayments and accrued income1		2,044.0		1,949.4
Other debtors1		494.4		541.3
		8,919.7		8,843.4

Note

¹  Comparative figures have been restated to be consistent with current year presentation.

F-24

Notes to the consolidated financial statements (continued)

17. Trade and other receivables (continued)

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

2011							Past due but not impaired
	Carrying amount at 31 December 2011 £m		Neither past due nor impaired £m		0-30 days £m		31-90 days £m		91-180 days £m		181 days- 1 year £m		Greater than 1 year £m
Trade receivables		6,305.1		3,887.3		1,624.5		648.8		119.5		6.2		18.8
Other financial assets		489.8		330.2		51.8		42.4		8.7		22.2		34.5
		6,794.9		4,217.5		1,676.3		691.2		128.2		28.4		53.3

2010							Past due but not impaired
	Carrying amount at 31 December 2010 £m		Neither past due nor impaired £m		0-30 days £m		31-90 days £m		91-180 days £m		181 days- 1 year £m		Greater than 1 year £m
Trade receivables		6,280.6		3,502.2		1,926.4		695.3		131.7		12.0		13.0
Other financial assets1		570.9		411.4		76.4		37.7		5.9		7.0		32.5
		6,851.5		3,913.6		2,002.8		733.0		137.6		19.0		45.5

Note

¹  Comparative figures have been restated to be consistent with current year presentation.

Other financial assets are included in other debtors.

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

Amounts falling due after more than one year:

	2011 £m		2010 £m
Prepayments and accrued income		2.4		5.6
Other debtors		121.8		123.2
Fair value of derivatives		184.9		194.7
		309.1		323.5

Movements on bad debt provisions were as follows:

	2011 £m			2010 £m			2009 £m
Balance at beginning of year		114.6			109.9			124.4
New acquisitions		4.0			2.0			0.7
Charged to operating costs		31.1			27.8			31.7
Exchange adjustments		(1.9	)		2.2			(8.5	)
Utilisations and other movements		(22.1	)		(27.3	)		(38.4	)
Balance at end of year		125.7			114.6			109.9

The allowance for bad and doubtful debts is equivalent to 2.0% (2010: 1.8%, 2009: 2.0%) of gross trade accounts receivable.

The Group considers that the carrying amount of trade and other receivables approximates their fair value.

18. Trade and other payables: amounts falling due within one year

The following are included in trade and other payables falling due within one year:

	2011 £m		2010 £m
Trade payables		7,292.7		7,701.1
Other taxation and social security		420.5		385.4
Payments due to vendors (earnout agreements)		96.8		207.4
Liabilities in respect of put option agreements with vendors		79.2		136.9
Other creditors and accruals		2,274.0		2,196.9
Deferred income		1,002.3		1,075.9
		11,165.5		11,703.6

The Group considers that the carrying amount of trade and other payables approximates their fair value.

19. Trade and other payables: amounts falling due after more than one year

The following are included in trade and other payables falling due after more than one year:

	2011 £m		2010 £m
Payments due to vendors (earnout agreements)		137.3		67.9
Liabilities in respect of put option agreements with vendors		89.1		34.1
Fair value of derivatives		139.9		129.4
Other creditors and accruals		186.8		157.2
		553.1		388.6

The Group considers that the carrying amount of trade and other payables approximates their fair value.

The following tables set out payments due to vendors, comprising deferred consideration and the directors’ best estimates of future earnout-related obligations:

	2011 £m		2010 £m
Within one year		96.8		207.4
Between one and two years		31.6		39.6
Between two and three years		25.2		12.1
Between three and four years		18.6		4.3
Between four and five years		28.9		4.1
Over five years		33.0		7.8
		234.1		275.3

	2011 £m
1 January 2011		275.3
Earnouts paid		(150.0	)
New acquisitions (note 28)		80.4
Revision of estimates taken to goodwill		25.9
Revaluation of payments due to vendors (note 6)		6.4
Exchange adjustments		(3.9	)
31 December 2011		234.1

As of 31 December 2011, the potential undiscounted amount of all future payments that could be required under the earnout agreements for acquisitions completed in the current year and for all earnout agreements range from £nil million to £256 million (2010: £nil million to £111 million) and £nil million to £931 million (2010: £nil million to £916 million), respectively.

F-25

Notes to the consolidated financial statements (continued)

20. Bank overdrafts, bonds and bank loans

Amounts falling due within one year:

	2011 £m		2010 £m
Bank overdrafts		518.4		255.4

The Group considers that the carrying amount of overdrafts and short-term borrowings approximates their fair value.

Amounts falling due after more than 1 year:

	2011 £m		2010 £m
Corporate bonds and bank loans		3,893.0		3,598.2

The Group estimates that the fair value of convertible and corporate bonds is £4,232.6 million at 31 December 2011 (2010: £4,034.1 million). The Group considers that the carrying amount of bank loans approximates their fair value.

The corporate bonds, convertible bonds, bank loans and overdrafts included within liabilities fall due for repayment as follows:

	2011 £m		2010 £m
Within one year		518.4		255.4
Between one and two years		620.6		94.2
Between two and three years		1,062.9		539.4
Between three and four years		455.0		1,249.1
Between four and five years		618.3		448.2
Over five years		1,136.2		1,267.3
		4,411.4		3,853.6

21. Provisions for liabilities and charges

The movements in 2011 and 2010 were as follows:

	Property £m			Other £m			Total £m
1 January 2010		65.7			87.2			152.9
Charged to the income statement		9.1			16.5			25.6
New acquisitions		–			1.2			1.2
Utilised		(7.0	)		(10.9	)		(17.9	)
Released to the income statement		(6.6	)		(3.4	)		(10.0	)
Transfers		(3.7	)		10.2			6.5
Exchange adjustments		0.9			2.4			3.3
31 December 2010		58.4			103.2			161.6
Charged to the income statement		11.8			16.5			28.3
New acquisitions		4.3			15.5			19.8
Utilised		(10.5	)		(13.3	)		(23.8	)
Released to the income statement		(6.3	)		(6.2	)		(12.5	)
Transfers		(9.6	)		(8.7	)		(18.3	)
Exchange adjustments		0.2			(1.3	)		(1.1	)
31 December 2011		48.3			105.7			154.0

Provisions comprise liabilities where there is uncertainty about the timing of settlement, but where a reliable estimate can be made of the amount. These include provisions for vacant space, sub-let losses and other property-related liabilities. Also included are other provisions, such as certain long-term employee benefits and legal claims, where the likelihood of settlement is considered probable.

21. Provisions for liabilities and charges (continued)

The Company and various of its subsidiaries are, from time to time, parties to legal proceedings and claims which arise in the ordinary course of business. The directors do not anticipate that the outcome of these proceedings and claims will have a material adverse effect on the Group’s financial position or on the results of its operations.

22. Share-based payments

Charges for share-based incentive plans were as follows:

	2011 £m		2010 £m		2009 £m
Share-based payments		78.8		70.4		54.9

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

As of 31 December 2011, there was £149.1 million (2010: £108.7 million) of total unrecognised compensation cost related to the Group’s restricted stock plans. That cost is expected to be recognised over a period of one to two years.

Further information on stock options is provided in note 26.

Restricted stock plans

The Group operates a number of equity-settled share incentive schemes, in most cases satisfied by the delivery of stock from one of the Group’s ESOP Trusts. The most significant current schemes are as follows:

Renewed Leadership Equity Acquisition Plan (Renewed LEAP) and Leadership Equity Acquisition Plan III (LEAP III)

Under Renewed LEAP and LEAP III, the most senior executives of the Group, including certain executive directors, commit WPP shares (‘investment shares’) in order to have the opportunity to earn additional WPP shares (‘matching shares’). The number of matching shares which a participant can receive at the end of the fixed performance period of five years is dependent on the performance (based on the Total Share Owner Return (TSR)) of the Company over that period against a comparator group of other listed communications services companies. The maximum possible number of matching shares for each of the 2011, 2010, 2009, 2008 and 2007 grants is five shares for each investment share. The 2007 Renewed LEAP plan vested in March 2012 at a match of 2.31 shares for each investment share.

Performance Share Awards (PSA)

Grants of stock under PSA are dependent upon annual performance targets, typically based on one or more of: operating profit, profit before taxation and operating margin. Grants are made in the year following the year of performance measurement, and vest two years after grant date provided the individual concerned is continually employed by the Group throughout this time.

Leaders, Partners and High Potential Group

Stock option grants under the executive stock option plan were not significant in 2011, 2010 or 2009 as the Group made grants of restricted stock (to be satisfied by stock from one of the Group’s ESOP Trusts) to participants instead. Performance conditions include continued employment over the three-year vesting period.

Valuation methodology

For all of these schemes, the valuation methodology is based upon fair value on grant date, which is determined by the market price on that date or the application of a Black-Scholes model, depending upon the characteristics of the scheme concerned. The assumptions underlying the Black-Scholes model are detailed in note 26, including details of assumed dividend yields. Market price on any given day is obtained from external, publicly available sources.

Market/Non-market conditions

Most share-based plans are subject to non-market performance conditions, such as margin or growth targets, as well as continued employment. The Renewed LEAP and LEAP III schemes are subject to a number of performance conditions, including TSR, a market-based condition.

For schemes without market-based performance conditions, the valuation methodology above is applied and, at each year end, the relevant accrual for each grant is revised, if appropriate, to take account of any changes in estimate of the likely number of shares expected to vest.

F-26

Notes to the consolidated financial statements (continued)

22. Share-based payments (continued)

For schemes with market-based performance conditions, the probability of satisfying these conditions is assessed at grant date through a statistical model (such as the Monte Carlo Model) and applied to the fair value. This initial valuation remains fixed throughout the life of the relevant plan, irrespective of the actual outcome in terms of performance. Where a lapse occurs due to cessation of employment, the cumulative charge taken to date is reversed.

Movement on ordinary shares granted for significant restricted stock plans:

	Non-vested 1 January 2011 number m			Granted number m		Lapsed number m			Vested number m			Non-vested 31 December 2011 number m
Renewed LEAP/LEAP III1		3.9			3.1		(0.0	)		(2.5	)		4.5
Performance Share Awards (PSA)		5.1			4.9		(0.3	)		(4.8	)		4.9
Leaders, Partners and High Potential Group		12.8			4.3		(1.1	)		(5.1	)		10.9
Weighted average fair value (pence per share):
Renewed LEAP/LEAP III1		593p			668p		540p			618p			633p
Performance Share Awards (PSA)		451p			731p		677p			408p			757p
Leaders, Partners and High Potential Group		538	p		616p		524p			356p			657p

Note

¹  The number of shares granted represents the ‘investment shares’ committed by participants at grant date for the 2011 LEAP III plan in addition to the matched shares awarded on vest date for the 2006 Renewed LEAP plan which vested in March 2011. The actual number of shares that vest for each Renewed LEAP/LEAP III plan is dependent on the extent to which the relevant performance criteria are satisfied.

The total fair value of shares vested for all the Group’s restricted stock plans during the year ended 31 December 2011 was £76.5 million (2010: £61.8 million, 2009: £55.0 million).

23. Provision for post-employment benefits

Companies within the Group operate a large number of pension plans, the forms and benefits of which vary with conditions and practices in the countries concerned. The Group’s pension costs are analysed as follows:

	2011 £m			2010 £m			2009 £m
Defined contribution plans		114.7			101.5			95.5
Defined benefit plans charge to operating profit		20.7			19.1			20.9
Pension costs (note 5)		135.4			120.6			116.4
Expected return on pension plan assets (note 6)		(32.6	)		(30.6	)		(28.7	)
Interest on pension plan liabilities (note 6)		43.8			45.9			46.1
		146.6			135.9			133.8

Defined benefit plans

The pension costs are assessed in accordance with the advice of local independent qualified actuaries. The latest full actuarial valuations for the various pension plans were carried out at various dates in the last three years. These valuations have generally been updated by the local independent qualified actuaries to 31 December 2011.

The Group’s policy is to close existing defined benefit plans to new members. This§has been implemented across a significant number of the pension plans.

Contributions to funded plans are determined in line with local conditions and practices. Contributions in respect of unfunded plans are paid as they fall due. The total contributions (for funded plans) and benefit payments (for unfunded plans) paid for 2011 amounted to £66.8 million (2010: £53.3 million, 2009: £47.7 million).

23. Provision for post-employment benefits (continued)

Employer contributions and benefit payments in 2012 are expected to be in the range of £60 million to £80 million depending on the performance of the assets.

(a) Assumptions

The main weighted average assumptions used for the actuarial valuations at 31 December are shown in the following table:

	2011 % pa		2010 % pa		2009 % pa		2008 % pa
UK
Discount rate1		4.7		5.4		5.7		6.0
Rate of increase in salaries		3.0		3.4		3.5		3.0
Rate of increase in pensions in payment		4.0		4.0		4.2		3.9
Inflation		2.5		3.2		3.5		2.8
Expected rate of return on equities		7.5		7.5		7.5		7.3
Expected rate of return on bonds1		3.6		4.5		4.8		4.9
Expected rate of return on insured annuities		4.7		5.4		5.7		6.0
Expected rate of return on property		6.9		6.9		6.9		6.9
Expected rate of return on cash and other		3.9		4.0		4.4		4.9
Weighted average return on assets		4.6		5.4		5.6		5.7
North America
Discount rate1		4.4		5.1		5.7		6.3
Rate of increase in salaries		3.0		3.0		3.0		3.0
Inflation		2.5		2.5		2.5		2.5
Expected rate of return on equities		7.9		7.9		7.9		7.9
Expected rate of return on bonds1		4.1		4.3		4.7		5.1
Expected rate of return on cash and other		3.9		6.4		6.6		3.4
Weighted average return on assets		5.9		6.4		6.5		6.6
Western Continental Europe
Discount rate1		4.8		5.3		5.5		5.7
Rate of increase in salaries		2.7		2.7		2.7		2.8
Rate of increase in pensions in payment		2.0		2.0		2.0		2.1
Inflation		2.0		2.0		2.1		2.1
Expected rate of return on equities		7.1		7.1		7.8		7.2
Expected rate of return on bonds1		3.8		4.4		4.1		4.5
Expected rate of return on property		6.1		6.1		6.5		6.0
Expected rate of return on cash and other		4.3		4.6		4.6		5.3
Weighted average return on assets		4.7		5.0		5.1		5.3
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe
Discount rate1		4.8		4.0		4.2		3.4
Rate of increase in salaries		5.7		4.4		4.2		3.9
Inflation		4.8		5.1		4.9		4.5
Expected rate of return on equities		n/a		10.0		10.1		10.0
Expected rate of return on bonds1		7.3		8.0		8.2		5.3
Expected rate of return on cash and other		5.4		1.0		1.1		2.1
Weighted average return on assets		5.8		3.4		3.6		3.1

Note

¹  The assumptions used for the discount rates are based on high-quality corporate bond yields, whereas the assumptions used for the expected rate of return on bonds reflect the yield expected on actual bonds held.

There are a number of areas in pension accounting that involve judgments made by management. These include establishing the long-term expected rates of investment return on pension assets, mortality assumptions, discount rates, inflation, rate of increase in pensions in payment and salary increases.

For the Group’s pension plans, the plans’ assets are invested with the objective of being able to meet current and future benefit payment needs, while controlling balance sheet volatility and future contributions. Pension plan assets are invested with a number of investment managers, and assets are diversified among equities, bonds, insured annuities, property and cash or other liquid investments. The primary use of bonds as an investment class is to match the anticipated cash flows from the plans to pay pensions. Various insurance policies have also been bought

F-27

Notes to the consolidated financial statements (continued)

23. Provision for post-employment benefits (continued)

historically to provide a more exact match for the cash flows, including a match for the actual mortality of specific plan members. These insurance policies effectively provide protection against both investment fluctuations and longevity risks. The strategic target allocation varies among the individual plans.

Management considers the types of investment classes in which the pension plan assets are invested and the expected compound return that can reasonably be expected for the portfolio to earn over time, which reflects forward-looking economic assumptions. Management reviews the expected long-term rates of return on an annual basis and revises them as appropriate.

Management periodically commission detailed asset and liability studies performed by third-party professional investment advisors and actuaries, that generate probability-adjusted expected future returns on those assets. These studies also project the estimated future pension payments and evaluate the efficiency of the allocation of the pension plan assets into various investment categories. The studies performed at the time these assumptions were set support the reasonableness of the return assumptions based on the target allocation of investment classes and the then current market conditions.

At 31 December 2011, the life expectancies underlying the value of the accrued liabilities for the main defined benefit pension plans operated by the Group were as follows:

Years life expectancy after age 65	All plans		North America		UK		Western Conti- nental Europe		Other1
– current pensioners (at age 65) – male		20.9		19.7		22.5		20.3		19.3
– current pensioners (at age 65) – female		22.8		21.6		24.0		23.5		24.7
– future pensioners (current age 45) – male		22.4		21.2		23.7		22.7		19.3
– future pensioners (current age 45) – female		24.0		22.5		25.1		25.4		24.7

Note

¹  Includes Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe.

The life expectancies after age 65 at 31 December 2010 were 20.7 years and 22.7 years for male and female current pensioners (at age 65) respectively, and 22.3 years and 23.9 years for male and female future pensioners (current age 45), respectively.

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

For a 0.25% increase or decrease in the discount rate at 31 December 2011, the effect on the year-end 2011 pension deficit would be a decrease or increase, respectively, of approximately £27 million.

(b) Assets and liabilities

At 31 December, the fair value of the assets in the pension plans, and the assessed present value of the liabilities in the pension plans are shown in the following table:

	2011 £m			%		2010 £m			%		2009 £m			%
Equities		168.7			25.8		188.2			29.8		168.5			28.6
Bonds		271.4			41.5		245.7			38.9		256.8			43.7
Insured annuities		67.6			10.4		66.3			10.5		68.7			11.7
Property		9.4			1.4		9.6			1.5		9.8			1.7
Cash and other		136.6			20.9		121.5			19.3		84.3			14.3
Total fair value of assets		653.7			100.0		631.3			100.0		588.1			100.0
Present value of liabilities		(934.5	)				(871.2	)				(836.1	)
Deficit in the plans		(280.8	)				(239.9	)				(248.0	)
Irrecoverable surplus		(1.1	)				(0.9	)				(3.1	)
Unrecognised past service cost		(0.4	)				(0.7	)				(0.7	)
Net liability1		(282.3	)				(241.5	)				(251.8	)
Plans in surplus		5.6					2.8					0.7
Plans in deficit		(287.9	)				(244.3	)				(252.5	)

Note

¹  The related deferred tax asset is discussed in note 15.

23. Provision for post-employment benefits (continued)

The total fair value of assets, present value of pension plan liabilities and deficit in the plans were £550.4 million, £819.1 million and £268.7 million in 2008 and £504.0 million, £637.6 million and £133.6 million in 2007, respectively.

Deficit in plans by region	2011 £m			2010 £m			2009 £m
UK		(1.6	)		(3.5	)		(22.0	)
North America		(172.5	)		(144.4	)		(140.9	)
Western Continental Europe		(84.5	)		(75.9	)		(73.9	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(22.2	)		(16.1	)		(11.2	)
Deficit in the plans		(280.8	)		(239.9	)		(248.0	)

Some of the Group’s defined benefit plans are unfunded (or largely unfunded) by common custom and practice in certain jurisdictions. In the case of these unfunded plans, the benefit payments are made as and when they fall due. Pre-funding of these plans would not be typical business practice.

The following table shows the split of the deficit at 31 December 2011, 2010 and 2009 between funded and unfunded pension plans.

	2011 Deficit £m			2011 Present value  of liabilities £m			2010 Deficit £m			2010 Present value of liabilities £m			2009 Deficit £m			2009 Present value of liabilities £m
Funded plans by region
UK		(1.6	)		(327.8	)		(3.5	)		(305.5	)		(22.0	)		(293.5	)
North America		(93.1	)		(340.2	)		(66.8	)		(306.5	)		(65.2	)		(274.5	)
Western Continental Europe		(36.4	)		(108.0	)		(29.7	)		(103.8	)		(25.0	)		(119.9	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(2.3	)		(11.1	)		(5.6	)		(21.1	)		(3.7	)		(16.1	)
Deficit/liabilities in the funded plans		(133.4	)		(787.1	)		(105.6	)		(736.9	)		(115.9	)		(704.0	)
Unfunded plans by region
UK		–			–			–			–			–			–
North America		(79.4	)		(79.4	)		(77.6	)		(77.6	)		(75.7	)		(75.7	)
Western Continental Europe		(48.1	)		(48.1	)		(46.2	)		(46.2	)		(48.9	)		(48.9	)
Asia Pacific, Latin America, Africa & Middle East and Central & Eastern Europe		(19.9	)		(19.9	)		(10.5	)		(10.5	)		(7.5	)		(7.5	)
Deficit/liabilities in the unfunded plans		(147.4	)		(147.4	)		(134.3	)		(134.3	)		(132.1	)		(132.1	)
Deficit/liabilities in the plans		(280.8	)		(934.5	)		(239.9	)		(871.2	)		(248.0	)		(836.1	)

In accordance with IAS 19, plans that are wholly or partially funded are considered funded plans.

F-28

Notes to the consolidated financial statements (continued)

23. Provision for post-employment benefits (continued)

(c) Pension expense

The following table shows the breakdown of the pension expense between amounts charged to operating profit, amounts charged to finance income and finance costs and amounts recognised in the consolidated statement of comprehensive income (OCI):

	2011 £m			2010 £m			2009 £m
Current service cost		23.7			23.3			22.0
Past service income		(2.8	)		(0.6	)		–
Gain on settlements and curtailments		(0.2	)		(3.6	)		(1.1	)
Charge to operating profit		20.7			19.1			20.9
Expected return on pension plan assets		(32.6	)		(30.6	)		(28.7	)
Interest on pension plan liabilities		43.8			45.9			46.1
Charge to profit before taxation for defined benefit plans		31.9			34.4			38.3
(Loss)/gain on pension plan assets relative to expected return		(5.7	)		31.9			44.0
Experience (loss)/gain arising on the plan liabilities		(3.9	)		3.4			(7.6	)
Changes in assumptions underlying the present value of the plan liabilities		(62.2	)		(37.9	)		(42.7	)
Change in irrecoverable surplus		(0.2	)		2.2			(0.9	)
Actuarial loss recognised in OCI		(72.0	)		(0.4	)		(7.2	)

As at 31 December 2011 the cumulative amount of net actuarial losses recognised in equity since 1 January 2001 was £252.7 million (31 December 2010: £180.7 million, 31 December 2009: £180.3 million). Of this amount, a net loss of £151.6 million was recognised since the 1 January 2004 adoption of IAS 19.

(d) Movement in plan liabilities

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

	2011 £m			2010 £m			2009 £m
Plan liabilities at beginning of year		871.2			836.1			819.1
Service cost		23.7			23.3			22.0
Interest cost		43.8			45.9			46.1
Actuarial loss		66.1			34.5			50.3
Benefits paid		(59.5	)		(57.2	)		(52.9	)
(Gain)/loss due to exchange rate movements		(2.0	)		9.7			(50.5	)
Settlements and curtailments		(13.7	)		(26.4	)		(3.3	)
Other1		4.9			5.3			5.3
Plan liabilities at end of year		934.5			871.2			836.1

Note

¹  Other includes disposals, acquisitions, plan participants’ contributions, plan amendments and reclassifications. The reclassifications represent certain of the Group’s defined benefit plans which are included in this note for the first time in the periods presented.

(e) Movement in plan assets

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

	2011 £m			2010 £m			2009 £m
Fair value of plan assets at beginning of year		631.3			588.1			550.4
Expected return on plan assets		32.6			30.6			28.7
Actuarial (loss)/gain on plan assets		(5.7	)		31.9			44.0
Employer contributions		66.8			53.3			47.7
Benefits paid		(59.5	)		(57.2	)		(52.9	)
(Loss)/gain due to exchange rate movements		(1.3	)		5.9			(28.3	)
Settlements		(13.5	)		(22.8	)		(2.2	)
Other1		3.0			1.5			0.7
Fair value of plan assets at end of year		653.7			631.3			588.1
Actual return on plan assets		26.9			62.5			72.7

23. Provision for post-employment benefits (continued)

Note

¹  Other includes disposals, acquisitions, plan participants’ contributions and reclassifications. The reclassifications represent certain of the Group’s defined benefit plans which are included in this note for the first time in the periods presented.

(f) History of experience gains and losses

	2011 £m			2010 £m			2009 £m
(Loss)/gain on pension plan assets relative to expected return:
Amount		(5.7	)		31.9			44.0
Percentage of plan assets		(0.9	%)		5.1	%		7.5	%
Experience (loss)/gain arising on the plan liabilities:
Amount		(3.9	)		3.4			(7.6	)
Percentage of the present value of the plan liabilities		(0.4	%)		0.4	%		(0.9	%)
Total loss recognised in OCI:
Amount		(72.	0)		(0.4	)		(7.2	)
Percentage of the present value of the plan liabilities		(7.7	%)		(0.0	%)		(0.9	%)

The experience (loss)/gain on pension plan assets and plan liabilities was (£93.7) million and £4.4 million in 2008 and (£6.0) million and £0.1 million in 2007, respectively.

24. Risk management policies

Foreign currency risk

The Group’s results in pounds sterling are subject to fluctuation as a result of exchange rate movements. The Group does not hedge this translation exposure to its earnings but does hedge the currency element of its net assets using foreign currency borrowings, cross-currency swaps and forward foreign exchange contracts.

The Group effects these currency net asset hedges by borrowing in the same currencies as the operating (or ‘functional’) currencies of its main operating units. The majority of the Group’s debt is therefore denominated in US dollars, pounds sterling and euros. Borrowings in these currencies represented 96.1% of the Group’s gross indebtedness at 31 December 2011 (at $3,058 million, £750 million and€1,274 million) and 96.2% of the Group’s average gross debt during the course of 2011 (at $2,792 million, £986 million and€1,274 million).

The Group’s operations conduct the majority of their activities in their own local currency and consequently the Group has no significant transactional foreign exchange exposures. Any significant cross-border trading exposures are hedged by the use of forward foreign-exchange contracts. No speculative foreign exchange trading is undertaken.

Interest rate risk

The Group is exposed to interest rate risk on both interest-bearing assets and interest-bearing liabilities. The Group has a policy of actively managing its interest rate risk exposure while recognising that fixing rates on all its debt eliminates the possibility of benefiting from rate reductions and similarly, having all its debt at floating rates unduly exposes the Group to increases in rates.

Including the effect of interest rate and cross-currency swaps, 75.8% of the year-end US dollar debt is at fixed rates averaging 6.00% for an average period of 63 months; 73.3% of the sterling debt is at a fixed rate of 6.07% for an average period of 70 months; and 66.7% of the euro debt is at fixed rates averaging 6.50% for an average period of 50 months.

Other than fixed rate debt, the Group’s other fixed rates are achieved principally through interest rate swaps with the Group’s bankers. The Group also uses forward rate agreements and interest rate caps to manage exposure to interest rate changes. At 31 December 2011 no forward rate agreements or interest rate caps were in place. These interest rate derivatives are used only to hedge exposures to interest rate movements arising from the Group’s borrowings and surplus cash balances arising from its commercial activities and are not traded independently. Payments made under these instruments are accounted for on an accruals basis.

F-29

Notes to the consolidated financial statements (continued)

24. Risk management policies (continued)

Going concern and liquidity risk

In considering going concern and liquidity risk, the directors have reviewed the Group’s future cash requirements and earnings projections. The directors believe these forecasts have been prepared on a prudent basis and have also considered the impact of a range of potential changes to trading performance to factor in an uncertain economic environment. The directors have concluded that the Group should be able to operate within its current facilities and comply with its banking covenants for the foreseeable future and therefore believe it is appropriate to prepare the financial statements of the Group on a going concern basis.

At 31 December 2011, the Group has access to £4.8 billion of committed funding and bank facilities with maturity dates spread over the years 2012 to 2021 as illustrated below:

	£m		2012 £m		2013 £m		2014 £m		2015 £m		2016 £m		2017 £m		2018+ £m
US bond $812m (4.75% ’21)		523.8														523.8
£ bonds £200m (6.375% ’20)		200.0														200.0
£ bonds £400m (6.0% ’17)		400.0												400.0
Bank revolver ($1,050m and £375m)		1,052.0										1,052.0
Eurobonds€750m (6.625% ’16)		626.7										626.7
Eurobonds€500m (5.25% ’15)		417.8								417.8
£450m convertible bonds (5.75% ’14)		450.0						450.0
US bond $600m (8.0% ’14)		386.9						386.9
US bond $369m (5.875% ’14)		237.7						237.7
Eurobonds€600m (4.375% ’13)		501.4				501.4
TNS private placements $55m		35.5		19.3				16.2
Total committed facilities available		4,831.8		19.3		501.4		1,090.8		417.8		1,678.7		400.0		723.8
Drawn down facilities at 31 December 2011		3,859.5		19.3		501.4		1,090.8		417.8		706.4		400.0		723.8
Undrawn committed credit facilities		972.3

The Group’s borrowings are evenly distributed between fixed and floating rate debt. Given the strong cash generation of the business, its debt maturity profile and available facilities, the directors believe the Group has sufficient liquidity to match its requirements for the foreseeable future.

Treasury activities

Treasury activity is managed centrally from London, New York and Hong Kong, and is principally concerned with the monitoring of working capital, managing external and internal funding requirements and the monitoring and management of financial market risks, in particular interest rate and foreign exchange exposures.

The treasury operation is not a profit centre and its activities are carried out in accordance with policies approved by the Board of Directors and subject to regular review and audit.

The Group manages liquidity risk by ensuring continuity and flexibility of funding even in difficult market conditions. Undrawn committed borrowing facilities are maintained in excess of peak net-borrowing levels and debt maturities are closely monitored. Targets for debt and cash position are set on an annual basis and, to assist in meeting this, working capital targets are set for all the Group’s major operations.

Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 10, cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, reserves and retained earnings as disclosed in the consolidated statement of changes in equity and in notes 26 and 27.

Credit risk

The Group’s principal financial assets are cash and short-term deposits, trade and other receivables and investments, the carrying values of which represent the Group’s maximum exposure to credit risk in relation to financial assets, as shown in note 25.

24. Risk management policies (continued)

The Group’s credit risk is primarily attributable to its trade receivables. The majority of the Group’s trade receivables are due from large national or multinational companies where the risk of default is considered low. The amounts presented in the consolidated balance sheet are net of allowances for doubtful receivables, estimated by the Group’s management based on prior experience and their assessment of the current economic environment. A relatively small number of clients make up a significant percentage of the Group’s debtors, but no single client represents more than 5% of total trade receivables as at 31 December 2011.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies or banks that have been financed by their government.

A relatively small number of clients contribute a significant percentage of the Group’s consolidated revenues. The Group’s clients generally are able to reduce advertising and marketing spending or cancel projects at any time for any reason. There can be no assurance that any of the Group’s clients will continue to utilise the Group’s services to the same extent, or at all, in the future. A significant reduction in advertising and marketing spending by, or the loss of one or more of, the Group’s largest clients, if not replaced by new client accounts or an increase in business from existing clients, would adversely affect the Group’s prospects, business, financial condition and results of operations.

Sensitivity analysis

The following sensitivity analysis addresses the effect of currency and interest rate risks on the Group’s financial instruments. The analysis assumes that all hedges are highly effective.

Currency risk

A 10% weakening of sterling against the Group’s major currencies would result in the following losses, which would be posted directly to equity. These losses would arise on the retranslation of foreign currency denominated borrowings and derivatives designated as effective net investment hedges of overseas net assets. These losses would be partially offset in equity by a corresponding gain arising on the retranslation of the related hedged foreign currency net assets. A 10% strengthening of sterling would have an equal and opposite effect. There are no other material foreign exchange exposures which would create gains or losses to the functional reporting currencies of individual entities in the Group.

	2011 £m		2010 £m
US dollar		91.5		91.0
Euro		71.8		73.7

Interest rate risk

A one percentage point increase in market interest rates for all currencies in which the Group had cash and borrowings at 31 December 2011 would increase profit before tax by approximately £3.7 million (2010: £8.0 million). A one percentage decrease in market interest rates would have an equal and opposite effect. This has been calculated by applying the interest rate change to the Group’s variable rate cash and borrowings.

25. Financial instruments

Currency derivatives

The Group utilises currency derivatives to hedge significant future transactions and cash flows and the exchange risk arising on translation of the Group’s investments in foreign operations. The Group is a party to a variety of foreign currency derivatives in the management of its exchange rate exposures. The instruments purchased are primarily denominated in the currencies of the Group’s principal markets.

At 31 December 2011, the fair value of the Group’s currency derivatives is estimated to be a net liability of approximately £75.5 million (2010: £62.9 million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £57.9 million (2010: £60.4 million) assets included in trade and other receivables and £133.4 million (2010: £123.3 million) liabilities included in trade and other payables. The amounts charged to and deferred in equity during the year for currency derivatives that are designated and effective hedges were £1.9 million (2010: £27.9 million) for net investment hedges and £14.0 million (2010: £34.8 million) for cash flow hedges.

Changes in the fair value relating to the ineffective portion of the currency derivatives amounted to a gain of £3.1 million (2010: £11.7 million, 2009: £3.3 million) which is included in the revaluation of financial instruments for the year. This gain resulted from a £12.8 million loss on hedging instruments and a £15.9 million gain on hedged items.

F-30

Notes to the consolidated financial statements (continued)

25. Financial instruments (continued)

The Group currently designates its foreign currency-denominated debt and cross-currency swaps as hedging instruments against the currency risk associated with the translation of its foreign operations.

At the balance sheet date, the total nominal amount of outstanding forward foreign exchange contracts not designated as hedges was £124.4 million (2010: £130.1 million). The Group estimates the fair value of these contracts to be a net asset of £2.6 million (2010: liability of £0.8 million).

These arrangements are designed to address significant exchange exposure and are renewed on a revolving basis as required.

Interest rate swaps

The Group uses interest rate swaps as hedging instruments in fair value hedges to manage its exposure to interest rate movements on its borrowings. Contracts with nominal values of€600 million have fixed interest receipts at 4.38% up until December 2013 and have floating interest payments averaging EURIBOR plus 0.56%. Contracts with a nominal value of€500 million have fixed interest receipts of 5.25% up until January 2015 and have floating interest payments averaging EURIBOR plus 0.80%. Contracts with a nominal value of€100 million have fixed interest payments of 5.56% until June 2014 and have floating rate receipts averaging EURIBOR plus 0.96%.

Contracts with a nominal value of £200 million have fixed interest receipts of 6.00% up until April 2017 and have floating rate payments averaging LIBOR plus 0.64%.

A contract with a nominal value of $45 million has fixed interest receipts averaging 6.29% until on average July 2013 and has floating rate payments averaging LIBOR plus 0.59%.

The fair value of interest rate swaps entered into at 31 December 2011 is estimated to be a net asset of approximately £121.0 million (2010: £129.0 million). These amounts are based on market values of equivalent instruments at the balance sheet date, comprising £127.5 million (2010: £133.4 million) assets included in trade and other receivables and £6.5 million (2010: £4.4 million) liabilities included in trade and other payables.

Changes in the fair value relating to the ineffective portion of interest rate swaps amounted to a loss of £9.5 million (2010: gain of £12.6 million, 2009: gain of £11.7 million) which is included in the revaluation of financial instruments for the year. This loss resulted from a £8.1 million loss on hedging instruments and a £1.4 million loss on hedged items.

25. Financial instruments (continued)

An analysis of the Group’s financial assets and liabilities by accounting classification is set out below:

	Derivatives in designated hedge relationships			Held for trading			Loans & receivables		Available for sale		Amortised cost			Carrying value
	£m			£m			£m		£m		£m			£m
2011
Other investments		–			–			–		190.8		–			190.8
Cash and short-term deposits		–			–			1,946.6		–		–			1,946.6
Bank overdrafts and loans		–			–			–		–		(518.4	)		(518.4	)
Bonds and bank loans		–			–			–		–		(3,893.0	)		(3,893.0	)
Trade and other receivables: amounts falling due within one year		–			–			6,718.4		–		–			6,718.4
Trade and other receivables: amounts falling due after more than one year		–			–			76.5		–		–			76.5
Trade and other payables: amounts falling due within one year		–			–			–		–		(7,376.7	)		(7,376.7	)
Trade and other payables: amounts falling due after more than one year		–			–			–		–		(10.2	)		(10.2	)
Derivative assets		185.4			3.1			–		–		–			188.5
Derivative liabilities		(139.9	)		(0.5	)		–		–		–			(140.4	)
Liabilities in respectof put options		–			(168.3	)		–		–		–			(168.3	)
		45.5			(165.7	)		8,741.5		190.8		(11,798.3	)		(2,986.2	)

F-31

Notes to the consolidated financial statements (continued)

25. Financial instruments (continued)

	Derivatives in designated hedge relationships			Held for trading			Loans & receivables		Available for sale		Amortised cost			Carrying value
	£m			£m			£m		£m		£m			£m
2010
Other investments		–			–			–		173.7		–			173.7
Cash and short-term deposits		–			–			1,965.2		–		–			1,965.2
Bank overdrafts and loans		–			–			–		–		(255.4	)		(255.4	)
Bonds and bank loans		–			–			–		–		(3,598.2	)		(3,598.2	)
Trade and other receivables: amounts falling due within one year1		–			–			6,774.2		–		–			6,774.2
Trade and other receivables: amounts falling due after more than one year		–			–			77.3		–		–			77.3
Trade and other payables: amounts falling due within one year		–			–			–		–		(7,769.9	)		(7,769.9	)
Trade and other payables: amounts falling due after more than one year		–			–			–		–		(11.4	)		(11.4	)
Derivative assets		168.6			26.1			–		–		–			194.7
Derivative liabilities		(123.3	)		(6.1	)		–		–		–			(129.4	)
Liabilities in respect of put options		–			(171.0	)		–		–		–			(171.0	)
		45.3			(151.0	)		8,816.7		173.7		(11,634.9	)		(2,750.2	)

Note

¹  Comparative figure has been restated to be consistent with current year presentation.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into levels 1 to 3 based on the degree to which the fair value is observable:

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 fair value measurements are those derived from inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

25. Financial instruments (continued)

	Level 1 £m		Level 2 £m			Level 3 £m			Carrying value £m
2011
Derivatives in designated hedge relationships
Derivative assets		–		185.4			–			185.4
Derivative liabilities		–		(139.9	)		–			(139.9	)
Held for trading
Derivative assets		–		3.1			–			3.1
Derivative liabilities		–		(0.5	)		–			(0.5	)
Liabilities in respect of put options		–		–			(168.3	)		(168.3	)
Available for sale
Other investments		–		–			190.8			190.8
		–		48.1			22.5			70.6

	Level 1 £m		Level 2 £m			Level 3 £m			Carrying value £m
2010
Derivatives in designated hedge relationships
Derivative assets		–		168.6			–			168.6
Derivative liabilities		–		(123.3	)		–			(123.3	)
Held for trading
Derivative assets		–		26.1			–			26.1
Derivative liabilities		–		(6.1	)		–			(6.1	)
Liabilities in respect of put options		–		–			(171.0	)		(171.0	)
Available for sale
Other investments		–		–			173.7			173.7
		–		65.3			2.7			68.0

Reconciliation of level 3 fair value measurements:

	Liabilities in respect of put options £m			Other investments £m			Carrying value £m
1 January 2010		(168.2	)		276.2			108.0
Losses recognised in the income statement		(3.6	)		(35.3	)		(38.9	)
Losses recognised in other comprehensive income		–			(61.3	)		(61.3	)
Exchange adjustments		(3.1	)		(23.4	)		(26.5	)
Additions		(5.9	)		20.2			14.3
Disposals		–			(2.7	)		(2.7	)
Settlements		9.8			–			9.8
31 December 2010		(171.0	)		173.7			2.7
Losses recognised in the income statement		(30.9	)		(30.8	)		(61.7	)
Gains recognised in other comprehensive income		–			11.3			11.3
Exchange adjustments		5.7			–			5.7
Additions		(29.6	)		36.6			7.0
Settlements		57.5			–			57.5
31 December 2011		(168.3	)		190.8			22.5

The fair value of financial assets and liabilities are based on quoted market prices where available. Where the market value is not available, the Group has estimated relevant fair values on the basis of publicly available information from outside sources or on the basis of discounted cash flow models where appropriate.

F-32

Notes to the consolidated financial statements (continued)

26. Authorised and issued share capital

	Equity ordinary shares			Nominal value £m
Authorised
1 January 2010		1,750,000,000			175.0
31 December 2010		1,750,000,000			175.0
31 December 2011		1,750,000,000			175.0
Issued and fully paid
1 January 2010		1,256,491,314			125.6
Exercise of share options		7,899,907			0.8
31 December 2010		1,264,391,221			126.4
Exercise of share options		5,548,684			0.6
Share cancellations		(6,955,523	)		(0.7	)
Scrip dividend		3,051,689			0.3
Other		337,750			–
31 December 2011		1,266,373,821			126.6

Company’s own shares

The Company’s holdings of own shares are stated at cost and represent shares held in treasury and purchases by the Employee Share Ownership Plan (‘ESOP’) trusts of shares in WPP plc for the purpose of funding certain of the Group’s share-based incentive plans.

The trustees of the ESOP purchase the Company’s ordinary shares in the open market using funds provided by the Company. The Company also has an obligation to make regular contributions to the ESOP to enable it to meet its administrative costs. The number and market value of the ordinary shares of the Company held by the ESOP at 31 December 2011 was 20,599,871 (2010: 22,083,378), and £139.2 million (2010: £174.3 million) respectively. The number and market value of ordinary shares held in treasury at 31 December 2011 was 6,351,371 (2010: 2,172,126) and £42.9 million (2010: £17.1 million) respectively.

26. Authorised and issued share capital (continued)

Share options

WPP Executive Share Option Scheme

As at 31 December 2011, unexercised options over ordinary shares of 4,900,445 and unexercised options over ADRs of 1,075,185 have been granted under the WPP Executive Share Option Scheme as follows:

Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
12,195		3.414		2012 - 2018
21,197		3.763		2006 - 2013
372,697		4.210		2005 - 2012
22,994		4.210		2005 - 2013
84,311		4.438		2005 - 2012
37,634		4.615		2007 - 2013
2,000,000		5.490		2007 - 2014
21,830		5.520		2008 - 2014
1,051,407		5.535		2007 - 2014
4,939		5.535		2007 - 2015
1,185		5.535		2008 - 2014
844,336		5.595		2006 - 2013
10,614		5.595		2006 - 2014
2,546		5.595		2007 - 2013
2,902		5.725		2007 - 2014
11,423		5.775		2009 - 2015
15,814		5.818		2008 - 2015
23,244		5.895		2008 - 2015
14,938		5.903		2011 - 2018
81,842		6.718		2009 - 2016
45,153		7.180		2005 - 2012
12,447		7.378		2014 - 2021
192,285		7.550		2005 - 2012
1,403		7.550		2006 - 2012
11,109		7.723		2010 - 2017

Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
3,844		26.010		2012 - 2019
1,662		30.080		2006 - 2013
1,644		30.410		2011 - 2018
206,692		33.200		2005 - 2012
334,499		47.410		2006 - 2013
1,548		48.450		2007 - 2014
5,819		50.670		2008 - 2015
373,602		50.800		2007 - 2014
9,508		51.220		2007 - 2014
7,069		53.030		2005 - 2012
85,869		54.050		2005 - 2012
4,488		55.740		2008 - 2015
17,616		57.020		2008 - 2015
13,686		58.460		2009 - 2016
2,111		59.170		2011 - 2018
1,250		63.900		2009 - 2020
4,278		75.940		2010 - 2017

F-33

Notes to the consolidated financial statements (continued)

26. Authorised and issued share capital (continued)

WPP Worldwide Share Ownership Program

As at 31 December 2011, unexercised options over ordinary shares of 10,415,492 and unexercised options over ADRs of 1,537,128 have been granted under the WPP Worldwide Share Ownership Program as follows:

Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
78,100		3.903		2006 - 2013
1,400		3.903		2007 - 2013
2,250		4.210		2005 - 2012
625		4.210		2005 - 2013
23,625		4.819		2011 - 2018
123,175		5.435		2007 - 2014
25,000		5.483		2012 - 2016
1,315,538		5.483		2012 - 2019
9,823		5.483		2012 - 2020
236,607		5.483		2013 - 2019
130,305		5.608		2012 - 2019
2,125		5.775		2008 - 2015
11,700		5.913		2011 - 2018
53,375		5.917		2011 - 2018
633,206		6.028		2011 - 2018
256,650		6.195		2008 - 2015
117,625		6.268		2014 - 2018
2,884,980		6.268		2014 - 2021
420,000		6.268		2015 - 2021
4,000		6.668		2009 - 2017
43,500		6.740		2009 - 2016
433,575		6.938		2009 - 2016
13,600		7.005		2010 - 2017
16,375		7.113		2013 - 2017
2,133,019		7.113		2013 - 2020
274,539		7.113		2014 - 2020
259,475		7.180		2005 - 2012
5,125		7.180		2006 - 2012
63,750		7.478		2011 - 2017
86,575		7.543		2014 - 2020
755,850		7.718		2010 - 2017

Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
21,520		30.800		2006 - 2013
236,667		44.560		2012 - 2019
427,081		49.230		2014 - 2021
30,310		49.880		2007 - 2014
18,010		53.030		2005 - 2012
311,889		56.560		2013 - 2020
168,376		59.500		2011 - 2018
82,185		59.520		2008 - 2015
108,625		60.690		2009 - 2016
132,465		75.760		2010 - 2017

The Grey Global Group, Inc 1994 Stock Incentive Plan

As at 31 December 2011, unexercised options over ADRs of 5,459 have been granted under the Grey Global Group, Inc 1994 Stock Incentive Plan as follows:

Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
1,827		28.300		2007 - 2012
3,632		30.830		2007 - 2012

26. Authorised and issued share capital (continued)

24/7 Real Media, Inc 2002 Stock Incentive Plan

As at 31 December 2011, unexercised options over ADRs of 43,783 have been granted under the 24/7 Real Media, Inc. 2002 Stock Incentive Plan as follows:

Number of ADRs under option	Exercise price per ADR ($)		Exercise dates
8		1.340		2007 - 2013
368		15.880		2007 - 2014
427		17.150		2007 - 2014
187		20.070		2007 - 2015
12		20.840		2007 - 2014
66		22.490		2007 - 2015
79		23.180		2007 - 2015
78		23.440		2007 - 2015
19		23.820		2007 - 2014
263		24.200		2007 - 2014
50		25.150		2007 - 2014
787		27.120		2007 - 2015
12,091		27.500		2007 - 2015
170		34.620		2007 - 2015
82		35.060		2007 - 2015
89		38.870		2007 - 2015
21,607		40.650		2007 - 2015
110		41.470		2007 - 2015
110		45.290		2007 - 2016
118		46.050		2007 - 2016
69		46.620		2007 - 2016
115		49.600		2007 - 2016
314		49.670		2007 - 2016
89		50.490		2007 - 2016
236		50.750		2008 - 2017
472		51.380		2008 - 2017
156		52.590		2008 - 2017
92		53.100		2006 - 2017
157		53.480		2008 - 2017
314		54.110		2007 - 2016
944		54.240		2007 - 2016
472		54.560		2007 - 2016
314		55.260		2007 - 2016
74		55.640		2007 - 2016
59		55.760		2007 - 2016
105		55.890		2007 - 2016
157		56.270		2007 - 2016
574		56.720		2007 - 2016
235		58.940		2007 - 2017
393		60.020		2007 - 2016
78		61.230		2008 - 2017
108		61.920		2007 - 2016
314		62.050		2007 - 2016
157		63.320		2008 - 2017
708		63.890		2008 - 2017
112		64.270		2007 - 2016
54		64.650		2007 - 2016
78		65.540		2007 - 2016
112		67.580		2007 - 2016

F-34

Notes to the consolidated financial statements (continued)

26. Authorised and issued share capital (continued)

Taylor Nelson Sofres plc

2005 Long Term Incentive Plan

As at 31 December 2011, unexercised options over ordinary shares of 32,979 have been granted under the Taylor Nelson Sofres Plc 2005 Long Term Incentive Plan as follows:

Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
32,979		–		2012

2008 New Share Plan

As at 31 December 2011 unexercised options over ordinary shares of 28,640 have been granted under the Taylor Nelson Sofres Plc 2008 New Share Plan as follows:

Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
28,640		–		2012

2005 Key Employee Equity Plan

As at 31 December 2011, unexercised options over ordinary shares of 4,274 have been granted under the Taylor Nelson Sofres Plc 2005 Key Employee Equity Plan as follows:

Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
4,274		–		2012

1999 Worldwide Employee Sharesave Plan

As at 31 December 2011, unexercised options over ordinary shares of 936,798 have been granted under the Taylor Nelson Sofres Plc 1999 Worldwide Employee Sharesave Plan as follows:

Number of ordinary shares under option	Exercise price per share (£)		Exercise dates
784,223		1.730		2013 - 2015
5,113		1.950		2011 - 2012
2,648		2.560		2009 - 2012
137,408		2.650		2012 - 2014
7,406		3.000		2011 - 2013

The aggregate status of the WPP Share Option Plans during 2011 was as follows:

Movements on options granted (represented in ordinary shares)

	1 January 2011		Granted		Exercised			Lapsed			Outstanding 31 December 2011		Exercisable 31 December 2011
WPP	14,706,582		12,447		(3,946,384)			(496,275)			10,276,370		10,232,508
WWOP		16,010,317		5,778,950		(992,659	)		(2,695,476	)		18,101,132		5,572,561
Tempus		24,306		–		(24,306	)		–			–		–
Grey		192,560		–		(165,265	)		–			27,295		27,295
24/7		270,100		–		(33,430	)		(17,755	)		218,915		171,685
TNS		1,411,221		–		(386,640	)		(21,890	)		1,002,691		15,167
		32,615,086		5,791,397		(5,548,684	)		(3,231,396	)		29,626,403		16,019,216

Weighted-average exercise price for options over:

									Outstanding		Exercisable
	1 January 2011		Granted		Exercised		Lapsed		31 December 2011		31 December 2011
Ordinary shares (£)
WPP		5.489		7.540		5.232		6.551		5.510		5.510
WWOP		6.218		6.311		6.197		6.782		6.463		6.706
Tempus		4.920		–		–		–		–		–
Grey		3.499		–		–		–		–		–
TNS		1.836		–		2.024		2.232		1.755		2.569
ADRs ($)
WPP		45.814		–		38.185		46.409		46.836		46.910
WWOP		56.457		49.230		48.992		56.097		54.569		61.742
Grey		30.417		–		30.524		n/a		29.983		29.983
24/7		38.610		–		34.982		45.749		38.585		38.018

26. Authorised and issued share capital (continued)

Options over ordinary shares

Outstanding

Range of exercise prices £	Weighted average exercise price £	Weighted average contractual life Months
nil – 7.723	5.888	73

Options over ADRs

Outstanding

Range of exercise prices $	Weighted average exercise price $	Weighted average contractual life Months
1.340 – 75.940	48.103	66

As at 31 December 2011 there was £7.9 million (2010: £6.8 million) of total unrecognised compensation cost related to share options. That cost is expected to be recognised over a weighted average period of 17 months (2010: 21 months).

Share options are satisfied out of newly issued shares.

The weighted average fair value of options granted in the year calculated using the Black-Scholes model, was as follows:

	2011		2010		2009
Fair value of UK options (shares)		120.6p		144.5p		115.5p
Fair value of US options (ADRs)	$	9.20	$	10.97	$	8.95
Weighted average assumptions:
UK Risk-free interest rate		0.84%		1.76%		2.27%
US Risk-free interest rate		0.67%		1.05%		1.85%
Expected life (months)		48		48		48
Expected volatility		30%		30%		30%
Dividend yield		2.5%		2.5%		2.5%

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

The weighted average share price of the Group for the year ended 31 December 2011 was £7.11 (2010: £6.78, 2009: £4.72) and the weighted average ADR price for the same period was $57.09 (2010: $52.51, 2009: $37.23).

Expected volatility is sourced from external market data and represents the historic volatility in the Group’s share price over a period equivalent to the expected option life.

Expected life is based on a review of historic exercise behaviour in the context of the contractual terms of the options, as described in more detail below.

Terms of share option plans

The Worldwide Share Ownership Program is open for participation to employees with at least two years’ employment in the Group. It is not available to those participating in other share-based incentive programs or to executive directors. The vesting period for each grant is three years and there are no performance conditions other than continued employment with the Group.

The Executive Stock Option Plan has historically been open for participation to WPP Group Leaders, Partners and High Potential Group. It is not currently offered to parent company executive directors. The vesting period is three years and performance conditions include achievement of various TSR (Total Share Owner Return) and EPS (Earnings per Share) objectives, as well as continued employment. In 2005, the Group moved away from the issuance of stock options for Leaders, Partners and High Potential Group and has since largely made grants of restricted stock instead (note 22).

The Group grants stock options with a life of 10 years, including the vesting period. The terms of stock options with performance conditions are such that if, after nine years and eight months, the performance conditions have not been met, then the stock option will vest automatically.

F-35

Notes to the consolidated financial statements (continued)

27. Other reserves

Other reserves comprise the following:

	Capital redemption reserve £m		Equity reserve £m			Revaluation reserve £m			Translation reserve £m			Total other reserves £m
1 January 2009		–		(82.9	)		87.3			1,246.1			1,250.5
Exchange adjustments on foreign currency net investments		–		–			–			(142.2	)		(142.2	)
Loss on revaluation of available for sale investments		–		–			(13.5	)		–			(13.5	)
Recognition and remeasurement of financial instruments		–		(36.4	)		–			–			(36.4	)
Equity component of convertible bonds (net of deferred tax)		–		34.7			–			–			34.7
31 December 2009		–		(84.6	)		73.8			1,103.9			1,093.1
Exchange adjustments on foreign currency net investments		–		–			–			146.6			146.6
Loss on revaluation of available for sale investments		–		–			(59.8	)		–			(59.8	)
Recognition and remeasurement of financial instruments		–		2.9			–			–			2.9
31 December 2010		–		(81.7	)		14.0			1,250.5			1,182.8
Exchange adjustments on foreign currency net investments		–		–			–			(250.0	)		(250.0	)
Gain on revaluation of available for sale investments		–		–			11.3			–			11.3
Recognition and remeasurement of financial instruments		–		(5.9	)		–			–			(5.9	)
Share cancellations		0.7		–			–			–			0.7
31 December 2011		0.7		(87.6	)		25.3			1,000.5			938.9

28. Acquisitions

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

28. Acquisitions (continued)

Acquisitions in 2011

The Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date.

	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		2.0			117.6			119.6
Property, plant and equipment		14.4			(0.4	)		14.0
Cash (net of overdrafts)		98.8			–			98.8
Trade receivables due within one year		211.3			(1.3	)		210.0
Other current assets		16.8			1.3			18.1
Total assets		343.3			117.2			460.5
Current liabilities		(283.1	)		–			(283.1	)
Trade and other payables due after one year		(5.7	)		(27.4	)		(33.1	)
Deferred tax liabilities		–			(37.2	)		(37.2	)
Provisions		(3.7	)		(16.1	)		(19.8	)
Bank loans		(17.5	)		–			(17.5	)
Total liabilities		(310.0	)		(80.7	)		(390.7	)
Net assets		33.3			36.5			69.8
Non-controlling interests								(20.7	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(72.6	)
Goodwill								454.5
Consideration								431.0
Consideration satisfied by:
Cash								350.6
Payments due to vendors (note 19)								80.4

Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients. Goodwill that is expected to be deductible for tax purposes is £126.0 million.

Non-controlling interests in acquired companies are measured at the non-controlling interest’s proportionate share of the acquirees’ identifiable net assets.

The contribution to revenue and operating profit of acquisitions completed in the year was not material. There were no material acquisitions completed between 31 December 2011 and the date the financial statements have been authorised for issue.

F-36

Notes to the consolidated financial statements (continued)

28. Acquisitions (continued)

Acquisitions in 2010

The Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date.

	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		0.7			25.5			26.2
Property, plant and equipment		9.1			–			9.1
Cash		57.0			–			57.0
Trade receivables due within one year		161.7			–			161.7
Other current assets		56.2			–			56.2
Total assets		284.7			25.5			310.2
Current liabilities		(259.1	)		–			(259.1	)
Trade and other payables due after one year		(1.1	)		(3.4	)		(4.5	)
Deferred tax liabilities		(0.1	)		(9.3	)		(9.4	)
Provisions		(0.5	)		(0.7	)		(1.2	)
Total liabilities		(260.8	)		(13.4	)		(274.2	)
Net assets		23.9			12.1			36.0
Non-controlling interests								(0.5	)
Fair value of equity stake in associate undertakings before acquisition of controlling interest								(32.6	)
Goodwill								161.1
Consideration								164.0
Consideration satisfied by:
Cash								131.2
Payments due to vendors (note 19)								32.8

Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients. Goodwill expected to be deductible for tax purposes is £14.3 million.

The contribution to revenue and operating profit of acquisitions completed in the year was not material.

28. Acquisitions (continued)

Acquisitions in 2009

The Group acquired a number of subsidiaries in the year. The following table sets out the book values of the identifiable assets and liabilities acquired and their fair value to the Group. The fair value adjustments for certain acquisitions have been determined provisionally at the balance sheet date.

	Book value at acquisition £m			Fair value adjustments £m			Fair value to Group £m
Intangible assets		–			6.6			6.6
Property, plant and equipment		2.6			–			2.6
Current assets		17.0			–			17.0
Total assets		19.6			6.6			26.2
Current liabilities		(11.8	)		(0.1	)		(11.9	)
Trade and other payables due after one year		(1.2	)		–			(1.2	)
Deferred tax liabilities		–			(2.8	)		(2.8	)
Provisions		(0.1	)		–			(0.1	)
Total liabilities		(13.1	)		(2.9	)		(16.0	)
Net assets		6.5			3.7			10.2
Non-controlling interest								(2.4	)
Goodwill								13.1
Consideration								20.9
Consideration satisfied by:
Cash								15.4
Payments due to vendors								4.6
Capitalised acquisition costs								0.9

Goodwill arising from acquisitions represents the value of synergies with our existing portfolio of businesses and skilled staff to deliver services to our clients.

The contribution to revenue and operating profit of acquisitions completed in the year was not material.

29. Principal subsidiary undertakings

The principal subsidiary undertakings of the Group are:

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

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

30. Related party transactions

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

F-37

Notes to the consolidated financial statements (continued)

31. Reconciliation of profit before interest and taxation to headline PBIT

Reconciliation of profit before interest and taxation to headline PBIT:

	2011 £m			2010 £m			2009 £m
Profit before interest and taxation		1,258.3			1,028.2			818.7
Amortisation and impairment of acquired intangible assets		172.0			170.5			172.6
Goodwill impairment		–			10.0			44.3
Gains on disposal of investments	(0.4)			(4.1)			(31.1)
Gains on re-measurement of equity on acquisition of controlling interest		(31.6	)		(13.7	)		–
Investment write-downs		32.8			37.5			11.1
Share of exceptional (gains)/losses of associates		(2.1	)		0.3			1.6
Headline PBIT		1,429.0			1,228.7			1,017.2
Headline PBIT margin (as a percent of revenue)		14.3	%		13.2	%		11.7	%

32. Condensed consolidating financial information

In November 2011, WPP Finance 2010 issued $812 million of 4.75% bonds due November 2021, with WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as subsidiary guarantors. $312 million of these bonds were issued in exchange for $281 million of the 5.875% bonds due June 2014 which were issued by WPP Finance (UK). Consequently, the amount in issue of the 5.875% bonds due June 2014 has reduced to $369 million from the previous $650 million.

WPP Finance (UK) is the issuer of $369 million of 5.875% bonds due June 2014, with WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited, and Young & Rubicam Brands US Holdings as subsidiary guarantors, previously registered under the Securities Act of 1933. A Form 15 giving notice of termination of registration was filed with the SEC in relation to this security on 2 August 2006. In June 2009 WPP Finance (UK) issued $600 million of 8% bonds due September 2014, with WPP plc as parent guarantor and WPP Air 1 Limited, WPP 2008 Limited and WPP 2005 Limited as subsidiary guarantors.

The issuer and guarantors of the bonds are each subject to the reporting requirements under section 15(d) of the Securities Exchange Act of 1934. Accordingly, condensed consolidating financial information containing financial information for WPP Finance (UK), WPP Finance 2010 and the guarantors is presented beginning on page F-39. Condensed consolidating financial information is prepared in accordance with IFRS, except to the extent that, in the parent company, subsidiary issuer and subsidiary guarantors columns investments in subsidiaries are accounted for under the equity method of accounting. Under the equity method, earnings of subsidiaries are reflected as “share of results of subsidiaries” in the income statement and as “investment in subsidiaries” in the balance sheet, as required by the SEC.

Although the $600 million and $812 million bonds do not have the identical subsidiary guarantor structure to the $369 million bonds, the exclusion of the financial information of Young & Rubicam Brands US Holdings has no financial impact on the columns presented in the condensed consolidating financial information for the years ended 31 December 2011, 2010 and 2009, as it is an indirect wholly owned subsidiary of WPP Air 1 Limited with no operations or cash flows of its own and its sole assets are its interests in certain operating subsidiaries.

In the event that WPP Finance (UK) and WPP Finance 2010 fail to pay the holders of the securities, thereby requiring WPP plc, WPP 2008 Limited, WPP 2005 Limited, Young & Rubicam Brands US Holdings or WPP Air 1 Limited to make payment pursuant to the terms of its full and unconditional, and joint and several guarantee of those securities, there is no impediment to WPP plc, WPP 2008 Limited, WPP 2005 Limited, Young & Rubicam Brands US Holdings or WPP Air 1 Limited in obtaining reimbursement for any such payments from WPP Finance (UK) and WPP Finance 2010.

F-38

32.    Condensed consolidating financial information (continued)

Condensed consolidating income statement information

For the year ended 31 December 2011, £m

	WPP plc			Subsidiary Guarantors1			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			—			10,021.8			—			10,021.8
Direct costs		—			—			—			—			(783.3	)		—			(783.3	)
Gross profit		—			—			—			—			9,238.5			—			9,238.5
Operating costs		(5.5	)		(62.5	)		—			—			(7,978.3	)		—			(8,046.3	)
Operating profit/(loss)		(5.5	)		(62.5	)		—			—			1,260.2			—			1,192.2
Share of results of subsidiaries		886.4			1,148.8			(1.9	)		—			—			(2,033.3	)		—
Share of results of associates		—			—			—			—			66.1			—			66.1
Profit/(loss) before interest and taxation		880.9			1,086.3			(1.9	)		—			1,326.3			(2,033.3	)		1,258.3
Finance income		—			60.8			3.9			0.8			31.8			—			97.3
Finance costs		(40.8	)		(268.5	)		(75.0	)		(2.7	)		89.8			—			(297.2	)
Revaluation of financial instruments		—			4.7			—			—			(54.7	)		—			(50.0	)
Profit/(loss) before taxation		840.1			883.3			(73.0	)		(1.9	)		1,393.2			(2,033.3	)		1,008.4
Taxation		—			3.1			—			—			(95.0	)		—			(91.9	)
Profit/(loss) for the year		840.1			886.4			(73.0	)		(1.9	)		1,298.2			(2,033.3	)		916.5
Attributable to:
Equity holders of the parent		840.1			886.4			(73.0	)		(1.9	)		1,221.8			(2,033.3	)		840.1
Non-controlling interests		—			—			—			—			76.4			—			76.4
		840.1			886.4			(73.0	)		(1.9	)		1,298.2			(2,033.3	)		916.5

For the year ended 31 December 2010, £m

	WPP plc			Subsidiary Guarantors1			WPP Finance (UK)			WPP Finance 2010		Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			—		9,331.0			—			9,331.0
Direct costs		—			—			—			—		(770.5	)		—			(770.5	)
Gross profit		—			—			—			—		8,560.5			—			8,560.5
Operating costs		(3.1	)		19.4			(0.1	)		—		(7,603.7	)		—			(7,587.5	)
Operating profit/(loss)		(3.1	)		19.4			(0.1	)		—		956.8			—			973.0
Share of results of subsidiaries		626.8			734.7			—			—		—			(1,361.5	)		—
Share of results of associates		—			—			—			—		55.2			—			55.2
Profit/(loss) before interest and taxation		623.7			754.1			(0.1	)		—		1,012.0			(1,361.5	)		1,028.2
Finance income		—			94.6			18.3			—		(31.2	)		—			81.7
Finance costs		(37.7	)		(224.5	)		(57.6	)		—		43.0			—			(276.8	)
Revaluation of financial instruments		—			0.7			—			—		17.5			—			18.2
Profit/(loss) before taxation		586.0			624.9			(39.4	)		—		1,041.3			(1,361.5	)		851.3
Taxation		—			1.9			—			—		(192.2	)		—			(190.3	)
Profit/(loss) for the year		586.0			626.8			(39.4	)		—		849.1			(1,361.5	)		661.0
Attributable to:
Equity holders of the parent		586.0			626.8			(39.4	)		—		774.1			(1,361.5	)		586.0
Non-controlling interests		—			—			—			—		75.0			—			75.0
		586.0			626.8			(39.4	)		—		849.1			(1,361.5	)		661.0

Note

¹ Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-39

32.    Condensed consolidating financial information (continued)

Condensed consolidating income statement information (continued)

For the year ended 31 December 2009, £m

	WPP plc			Subsidiary Guarantors1			WPP Finance (UK)			WPP Finance 2010		Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Revenue		—			—			—			—		8,684.3			—			8,684.3
Direct costs		—			—			—			—		(703.6	)		—			(703.6	)
Gross profit		—			—			—			—		7,980.7			—			7,980.7
Operating costs		(5.0	)		(100.4	)		—			—		(7,113.6	)		—			(7,219.0	)
Operating profit/(loss)		(5.0	)		(100.4	)		—			—		867.1			—			761.7
Share of results of subsidiaries		465.5			733.6			—			—		—			(1,199.1	)		—
Share of results of associates		—			—			—			—		57.0			—			57.0
Profit before interest and taxation		460.5			633.2			—			—		924.1			(1,199.1	)		818.7
Finance income		—			165.8			14.6			—		(30.0	)		—			150.4
Finance costs		(22.8	)		(340.3	)		(42.5	)		—		50.2			—			(355.4	)
Revaluation of financial instruments		—			6.0			—			—		42.9			—			48.9
Profit/(loss) before taxation		437.7			464.7			(27.9	)		—		987.2			(1,199.1	)		662.6
Taxation		—			0.8			—			—		(156.5	)		—			(155.7	)
Profit/(loss) for the year		437.7			465.5			(27.9	)		—		830.7			(1,199.1	)		506.9
Attributable to:
Equity holders of the parent		437.7			465.5			(27.9	)		—		761.5			(1,199.1	)		437.7
Non-controlling interests		—			—			—			—		69.2			—			69.2
		437.7			465.5			(27.9	)		—		830.7			(1,199.1	)		506.9

Note

¹ Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-40

32.    Condensed consolidating financial information (continued)

Condensed consolidating cash flow statement information

For the year ended 31 December 2011, £m

	WPP plc			Subsidiary Guarantors1			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications / Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		474.2			(404.7	)		155.3			(518.3	)		958.7			—		665.2
Investing activities
Acquisitions and disposals		—			—			—			—			(469.8	)		—		(469.8	)
Purchases of property, plant and equipment		—			(5.0	)		—			—			(211.1	)		—		(216.1	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			—			(37.1	)		—		(37.1	)
Proceeds on disposal of property, plant and equipment		—			0.5			—			—			12.7			—		13.2
Net cash outflow from investing activities		—			(4.5	)		—			—			(705.3	)		—		(709.8	)
Financing activities
Share option proceeds		28.8			—			—			—			—			—		28.8
Cash consideration for non-controlling interests		—			—			—			—			(62.6	)		—		(62.6	)
Share repurchases and buy-backs		(75.7	)		—			—			—			(106.5	)		—		(182.2	)
Net increase/(decrease) in borrowings		—			—			(201.4	)		523.8			(21.0	)		—		301.4
Financing and share issue costs		—			—			—			(5.5	)		(6.4	)		—		(11.9	)
Capital contribution (paid)/received		(554.9	)		475.1			—			—			79.8			—		—
Equity dividends paid		(18.0	)		(121.0	)		—			—			(79.4	)		—		(218.4	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			—			(62.2	)		—		(62.2	)
Net cash (outflow)/inflow from financing activities		(619.8	)		354.1			(201.4	)		518.3			(258.3	)		—		(207.1	)
Net decrease in cash and cash equivalents		(145.6	)		(55.1	)		(46.1	)		—			(4.9	)		—		(251.7	)
Translation differences		(0.2	)		(29.2	)		3.7			—			(4.2	)		—		(29.9	)
Cash and cash equivalents at beginning of year		1.4			(2,839.2	)		722.0			—			3,825.6			—		1,709.8
Cash and cash equivalents at end of year		(144.4	)		(2,923.5	)		679.6			—			3,816.5			—		1,428.2

For the year ended 31 December 2010, £m

	WPP plc			Subsidiary Guarantors1			WPP Finance (UK)			WPP Finance 2010		Other Subsidiaries			Reclassifications / Eliminations		Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		28.1			(395.6	)		(30.6	)		—		1,759.3			—		1,361.2
Investing activities
Acquisitions and disposals		—			20.2			—			—		(220.3	)		—		(200.1	)
Purchases of property, plant and equipment		—			(3.9	)		—			—		(186.6	)		—		(190.5	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			—		(27.0	)		—		(27.0	)
Proceeds on disposal of property, plant and equipment		—			—			—			—		7.6			—		7.6
Net cash (outflow)/inflow from investing activities		—			16.3			—			—		(426.3	)		—		(410.0	)
Financing activities
Share option proceeds		42.7			—			—			—		—			—		42.7
Cash consideration for non-controlling interests		—			—			—			—		(15.1	)		—		(15.1	)
Share repurchases and buy-backs		—			—			—			—		(46.4	)		—		(46.4	)
Net increase in borrowings		—			—			—			—		19.8			—		19.8
Financing and share issue costs		—			—			—			—		(3.5	)		—		(3.5	)
Capital contribution (paid)/received		—			—			—			—		—			—		—
Equity dividends paid		(13.4	)		(187.0	)		—			—		—			—		(200.4	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			—		(66.7	)		—		(66.7	)
Net cash (outflow)/inflow from financing activities		29.3			(187.0	)		—			—		(111.9	)		—		(269.6	)
Net increase/(decrease) in cash and cash equivalents		57.4			(566.3	)		(30.6	)		—		1,221.1			—		681.6
Translation differences		0.1			(27.9	)		25.9			—		84.1			—		82.2
Cash and cash equivalents at beginning of year		(56.1	)		(2,245.0	)		726.7			—		2,520.4			—		946.0
Cash and cash equivalents at end of year		1.4			(2,839.2	)		722.0			—		3,825.6			—		1,709.8

Note

¹  Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-41

32.    Condensed consolidating financial information (continued)

Condensed consolidating cash flow statement information (continued)

For the year ended 31 December 2009, £m

	WPP plc			Subsidiary Guarantors1			WPP Finance (UK)			WPP Finance 2010		Other Subsidiaries			Reclassifications / Eliminations			Consolidated WPP plc
Net cash inflow/(outflow) from operating activities		(468.3	)		(223.6	)		(28.5	)		—		1,539.3			(0.1	)		818.8
Investing activities
Acquisitions and disposals		—			—			—			—		(118.4	)		—			(118.4	)
Purchases of property, plant and equipment		—			(2.1	)		—			—		(220.8	)		—			(222.9	)
Purchases of other intangible assets (including capitalised computer software)		—			—			—			—		(30.4	)		—			(30.4	)
Proceeds on disposal of property, plant and equipment		—			—			—			—		9.2			—			9.2
Net cash outflow from investing activities		—			(2.1	)		—			—		(360.4	)		—			(362.5	)
Financing activities
Share option proceeds		4.1			—			—			—		—			—			4.1
Cash consideration for non-controlling interests		—			—			—			—		(26.4	)		—			(26.4	)
Share repurchases and buy-backs		(9.5	)		—			—			—		—			—			(9.5	)
Net (decrease)/increase in borrowings		450.0			(1,050.7	)		370.7			—		(196.3	)		—			(426.3	)
Financing and share issue costs		(10.0	)		—			—			—		(8.8	)		—			(18.8	)
Capital contribution (paid)/received		—			(111.7	)		—			—		111.7			—			—
Equity dividends paid		(22.3	)		(55.9	)		—			—		(111.7	)		0.1			(189.8	)
Dividends paid to non-controlling interests in subsidiary undertakings		—			—			—			—		(63.0	)		—			(63.0	)
Net cash (outflow)/inflow from financing activities		412.3			(1,218.3	)		370.7			—		(294.5	)		0.1			(729.7	)
Net (decrease)/increase in cash and cash equivalents		(56.0	)		(1,444.0	)		342.2			—		884.4			—			(273.4	)
Translation differences		0.1			(207.8	)		(41.4	)		—		150.4			—			(98.7	)
Cash and cash equivalents at beginning of year		(0.2	)		(593.2	)		425.9			—		1,485.6			—			1,318.1
Cash and cash equivalents at end of year		(56.1	)		(2,245.0	)		726.7			—		2,520.4			—			946.0

Note

¹  Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-42

32.    Condensed consolidating financial information (continued)

Condensed consolidating balance sheet information

At 31 December 2011, £m

	WPP plc			Subsidiary guarantors1			WPP Finance (UK)			WPP Finance 2010			Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			—			9,430.8			—			9,430.8
Other		—			—			—			—			1,859.9			—			1,859.9
Property, plant and equipment		—			8.0			—			—			720.3			—			728.3
Investment in subsidiaries		7,350.0			13,282.1			—			—			—			(20,632.1	)		—
Interests in associates and joint ventures		—			—			—			—			801.3			—			801.3
Other investments		—			—			—			—			190.8			—			190.8
Deferred tax assets		—			—			—			—			86.0			—			86.0
Trade and other receivables		—			128.9			—			—			180.2			—			309.1
		7,350.0			13,419.0			—			—			13,269.3			(20,632.1	)		13,406.2
Current assets
Inventory and work in progress		—			—			—			—			333.9			—			333.9
Corporate income tax recoverable		—			—			—			—			88.5			—			88.5
Trade and other receivables		—			109.4			2.1			0.2			8,808.0			—			8,919.7
Cash and short-term deposits		0.5			1,123.9			679.6			—			4,334.9			(4,192.3	)		1,946.6
		0.5			1,233.3			681.7			0.2			13,565.3			(4,192.3	)		11,288.7
Current Liabilities
Trade and other payables		(5.2	)		(87.5	)		(9.6	)		(4.0	)		(11,059.2	)		—			(11,165.5	)
Corporate income tax payable		—			—			—			—			(113.4	)		—			(113.4	)
Bank overdrafts and loans		(144.9	)		(4,047.4	)		—			—			(518.4	)		4,192.3			(518.4	)
		(150.1	)		(4,134.9	)		(9.6	)		(4.0	)		(11,691.0	)		4,192.3			(11,797.3	)
Net current (liabilities)/assets		(149.6	)		(2,901.6	)		672.1			(3.8	)		1,874.3			—			(508.6	)
Total assets less current liabilities		7,200.4			10,517.4			672.1			(3.8	)		15,143.6			(20,632.1	)		12,897.6
Non-current liabilities
Bonds and bank loans		(424.0	)		(1,586.4	)		(621.9	)		(518.3	)		(742.4	)		—			(3,893.0	)
Trade and other payables		—			(109.5	)		(2.0	)		—			(443.6	)		2.0			(553.1	)
Corporate income tax payable		—			—			—			—			(379.5	)		—			(379.5	)
Deferred tax liabilities		—			—			—			—			(741.4	)		—			(741.4	)
Provision for post-employment benefits		—			—			—			—			(282.3	)		—			(282.3	)
Provisions for liabilities and charges		—			—			—			—			(154.0	)		—			(154.0	)
		(424.0	)		(1,695.9	)		(623.9	)		(518.3	)		(2,743.2	)		2.0			(6,003.3	)
Net intercompany (payable)/receivable		(113.1	)		(1,471.5	)		(206.9	)		520.1			1,271.4			—			—
Net assets/(liabilities)		6,663.3			7,350.0			(158.7	)		(2.0	)		13,671.8			(20,630.1	)		6,894.3
Attributable to:
Equity share owners’ funds		6,663.3			7,350.0			(158.7	)		(2.0	)		13,440.8			(20,630.1	)		6,663.3
Non-controlling interests		—			—			—			—			231.0			—			231.0
Total equity		6,663.3			7,350.0			(158.7	)		(2.0	)		13,671.8			(20,630.1	)		6,894.3

Note

¹  Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-43

32.    Condensed consolidating financial information (continued)

Condensed consolidating balance sheet information (continued)

At 31 December 2010, £m

	WPP plc			Subsidiary guarantors1			WPP Finance (UK)			WPP Finance 2010		Other Subsidiaries			Reclassifications/ Eliminations			Consolidated WPP plc
Non-current assets
Intangible assets:
Goodwill		—			—			—			—		9,106.3			—			9,106.3
Other		—			—			—			—		1,904.5			—			1,904.5
Property, plant and equipment		—			4.6			—			—		703.8			—			708.4
Investment in subsidiaries		6,469.4			12,520.8			—			—		—			(18,990.2	)		—
Interests in associates and joint ventures		—			—			—			—		792.1			—			792.1
Other investments		—			—			—			—		173.7			—			173.7
Deferred tax assets		—			—			—			—		79.1			—			79.1
Trade and other receivables		—			126.2			—			—		197.3			—			323.5
		6,469.4			12,651.6			—			—		12,956.8			(18,990.2	)		13,087.6
Current assets
Inventory and work in progress		—			—			—			—		366.0			—			366.0
Corporate income tax recoverable		—			—			—			—		82.9			—			82.9
Trade and other receivables		0.3			50.1			2.8			—		8,790.2			—			8,843.4
Cash and short-term deposits		1.4			903.7			722.0			—		4,081.0			(3,742.9	)		1,965.2
		1.7			953.8			724.8			—		13,320.1			(3,742.9	)		11,257.5
Current Liabilities
Trade and other payables		(4.8	)		(72.6	)		(10.1	)		—		(11,616.1	)		—			(11,703.6	)
Corporate income tax payable		—			—			—			—		(115.8	)		—			(115.8	)
Bank overdrafts and loans		—			(3,742.9	)		—			—		(255.4	)		3,742.9			(255.4	)
		(4.8	)		(3,815.5	)		(10.1	)		—		(11,987.3	)		3,742.9			(12,074.8	)
Net current (liabilities)/assets		(3.1	)		(2,861.7	)		714.7			—		1,332.8			—			(817.3	)
Total assets less current liabilities		6,466.3			9,789.9			714.7			—		14,289.6			(18,990.2	)		12,270.3
Non-current liabilities
Bonds and bank loans		(413.2	)		(1,608.8	)		(797.4	)		—		(778.8	)		—			(3,598.2	)
Trade and other payables		—			(110.1	)		—			—		(278.5	)		—			(388.6	)
Corporate income tax payable		—			—			—			—		(481.8	)		—			(481.8	)
Deferred tax liabilities		—			—			—			—		(750.7	)		—			(750.7	)
Provision for post-employment benefits		—			—			—			—		(241.5	)		—			(241.5	)
Provisions for liabilities and charges		—			—			—			—		(161.6	)		—			(161.6	)
		(413.2	)		(1,718.9	)		(797.4	)		—		(2,692.9	)		—			(5,622.4	)
Net intercompany receivable/(payable)		393.5			(1,601.6	)		—			—		1,208.1			—			—
Net assets/(liabilities)		6,446.6			6,469.4			(82.7	)		—		12,804.8			(18,990.2	)		6,647.9
Attributable to:
Equity share owners’ funds		6,446.6			6,469.4			(82.7	)		—		12,603.5			(18,990.2	)		6,446.6
Non-controlling interests		—			—			—			—		201.3			—			201.3
Total equity		6,446.6			6,469.4			(82.7	)		—		12,804.8			(18,990.2	)		6,647.9

Note

¹  Includes: WPP Air 1 Limited, WPP 2008 Limited, WPP 2005 Limited and Young & Rubicam Brands US Holdings.

F-44

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of WPP DAS Ltd

We have audited the accompanying balance sheets of WPP DAS Ltd (the “Trust”) as at 31 December 2011 and 2010 and the related cash flow statements and statement of changes in equity for each of the three years in the period ended 31 December 2011. These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Trust is not required to have an audit of its internal control over financial reporting. Our audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing any opinion on the Trust’s internal control over financial reporting. Accordingly, we express no such separate opinion. Our audits of the financial statements included 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 our opinion.

In our opinion, such financial statements referred to above present fairly, in all material respects, the financial position of the Trust as at 31 December 2011 and 2010, and its cash flows for each of the three years in the period ended 31 December 2011, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

/s/ Deloitte LLP

Deloitte LLP

London, United Kingdom

30 April 2012

F-45

Cash flow statement

For the years ended 31 December 2011, 2010 and 2009

	Notes	2011 £m			2010 £m		2009 £m
Net cash inflow from operating activities			–			–		–
Investing activities			–			–		–
Financing activities			–			–		–
Issue of ordinary shares	3		79.4			–		111.7
Dividends paid	4		(79.4	)		–		(111.7	)
Net cash inflow from financing activities			–			–		–
Net increase in cash and cash equivalents			–			–		–
Cash and cash equivalents at beginning of year			–			–		–
Cash and cash equivalents at end of year			–			–		–

Note

The accompanying notes form an integral part of this cash flow statement.

Balance sheet

At 31 December 2011, 2010

	2011 £m	2010 £m
Assets	–	–
Liabilities	–	–
Net assets	–	–
Equity	–	–

Note

The accompanying notes form an integral part of this balance sheet.

Statement of changes in equity

For the years ended 31 December 2011, 2010 and 2009

	Notes		Share capital £m			Distributable Reserve £m			Total £m
At 1 January 2009				–			–			–
Issue of ordinary shares		3		167.6			–			167.6
Capital reduction		3		(167.6	)		167.6			–
Dividends		4		–			(167.6	)		(167.6	)
At 31 December 2009				–			–			–
Issue of ordinary shares		3		187.0			–			187.0
Capital reduction		3		(187.0	)		187.0			–
Dividends		4		–			(187.0	)		(187.0	)
At 31 December 2010				–			–			–
Issue of ordinary shares		3		200.4						200.4
Capital reduction		3		(200.4	)		200.4
Dividends		4		–			(200.4	)		(200.4	)
At 31 December 2011				–			–			–

Note

The accompanying notes form an integral part of this statement of changes in equity.

F-46

Notes to the financial statements

1. The dividend access trust

WPP DAS Limited (the “Trust”) was established on 9 July 2008 by WPP plc to which the Trust issued a called-up share capital of 1 ordinary share with a nominal value of £1. The Trust is governed by the applicable laws of England and Wales and is a resident for tax purposes in the United Kingdom, WPP plc is a resident for tax purposes in the Republic of Ireland. The Trust is a wholly owned subsidiary of WPP 2008 Limited which is an indirect wholly owned subsidiary of WPP plc.

WPP DAS Limited was formed as part of WPP’s Dividend Access Plan, which was primarily designed to ensure that WPP share owners may continue to receive UK dividends, meaning in particular that under the Dividend Access Plan, no Irish tax is required to be withheld from the payment of dividends to share owners. To facilitate WPP’s Dividend Access Plan, in April 2009 the Trust issued one non-voting dividend access share with a nominal value of £1 to the trustee. WPP share owners will not have any interest in the dividend access share and will not have any rights against the Trust as the issuer of the dividend access share. The only assets held in trust for the benefit of share owners will be dividends paid to the trustee in respect of the dividend access share.

To ensure compliance with UK trust law rules, the period during which the dividend access trust may continue is restricted. However, the dividend access trust under current law is able to continue for 80 years from inception.

2. Accounting policies

Basis of preparation

The financial statements have been prepared under the historical cost convention and in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB) as they apply to the financial statements of the Trust for the year ended 31 December 2011.

The financial statements were approved by the Board of Directors and authorised for issue on 30 April 2012.

Income statement and statement of comprehensive income

An income statement and a statement of comprehensive income are not presented with these financial statements because the Trust did not receive income, incur expense or recognise any gain or loss during the periods presented.

The directors received no remuneration for services to the Trust and the Trust had no employees during the periods presented. All operating expenses were borne by WPP 2005 Limited.

Functional currency

The functional currency of the Trust is pounds sterling.

Taxation

The Trust is not required to withhold at source any amount in respect of UK tax from dividend payments it makes under the Dividend Access Plan regardless of who the recipient of the payments is.

3. Share capital and distributable reserve

On 30 June 2009 the Trust issued 111,691,009 ordinary shares of £1 each to another Group company and on the same date a capital reduction was performed. On 30 October 2009 the Trust issued a further 55,865,345 ordinary shares of £1 each and on the same date a capital reduction was performed. As a result of this transaction the Trust remained with called-up share capital of 1 ordinary share of £1 and 1 dividend access share of £1.

On 25 March 2010 the Trust issued 117,301,956 ordinary shares of £1 each to another Group company and on the same date a capital reduction was performed. On 28 October 2010 the Trust issued a further 69,706,978 ordinary shares of £1 each and on the same date a capital reduction was performed. As a result of this transaction the Trust remained with called-up share capital of 1 ordinary share of £1 and 1 dividend access share of £1.

On 29 June 2011 the Trust issued 121,002,475 ordinary shares of £1 each to another Group company and on the same date a capital reduction was performed. On 8 November 2011 the Trust issued a further 79,370,302 ordinary shares of £1 each and on the same date a capital reduction was performed. As a result of this transaction the Trust remained with called-up share capital of 1 ordinary share of £1 and 1 dividend access share of £1.

4. Dividends

	2011 £m		2010 £m		2009 £m
2008 second interim dividend of 10.28p per ordinary share		–		–		111.7
2009 first interim dividend of 5.19p per ordinary share1		–		–		55.9
2009 second interim dividend of 10.28p per ordinary share1		–		117.3		–
2010 first interim dividend of 5.97p per ordinary share1		–		69.7		–
2010 second interim dividend of 11.82p per ordinary share1		121.0		–		–
2011 first interim dividend of 7.46p per ordinary share		79.4		–		–
		200.4		187.0		167.6

¹  This dividend was settled in cash by another Group company on behalf of the Trust.

F-47

Exhibit Index

Exhibit No.	Exhibit Title
1.1	Memorandum and Articles of Association of WPP plc, as amended 2 June 2011.
2.22	Agreement of Registrant to file, if requested by the Securities and Exchange Commission, instruments relating to $812.4 million of 4.75% Senior Notes due 2021.
4.16	WPP plc Restricted Stock Plan, as amended through 11 April 2011.
4.40	Leadership Equity Acquisition Plan III, as amended through 12 November 2011.
4.41	Second Amendment, dated 22 June 2011, to Supplemental Retirement Agreement, dated as of 1 July 2008, by and between WPP Group USA, Inc. and Paul Richardson.
8.1	List of subsidiaries.
12.1	Certification of Group Chief Executive.
12.2	Certification of Group Finance Director.
13.1	Certification of Group Chief Executive under 18 U.S.C. Section 1350.
13.2	Certification of Group Finance Director under 18 U.S.C. Section 1350.
14.1	Consent of Independent Registered Public Accounting Firm (for WPP plc and subsidiaries).
14.2	Consent of Independent Registered Public Accounting Firm (for WPP DAS Limited).