Executive Summary

We are a strategic holding company. We provide professional services to clients through multiple agencies around the world. On a global, pan-regional and local basis, our agencies provide these services in the following disciplines: traditional media advertising, customer relationship management ("CRM"), public relations and specialty communications. Our business model was built and evolves around our clients. While our companies operate under different names and frame their ideas in different disciplines, we organize our services around our clients. The fundamental premise of our business is that our clients' specific requirements should be the central focus in how we structure our business offerings and allocate our resources. This client-centric business model results in multiple agencies collaborating in formal and informal virtual networks that cut across internal organizational structures to deliver consistent brand messages for a specific client and execute against each of our clients' specific marketing requirements. We continually seek to grow our business with our existing clients by maintaining our client-centric approach, as well as expanding our existing business relationships into new markets and with new clients. In addition, we pursue selective acquisitions of complementary companies with strong, entrepreneurial management teams that typically either currently serve or have the ability to serve our existing client base.

In recent years, certain business trends that include our clients increasingly expanding the focus of their brand strategies from national markets to pan-regional and global markets and migrating from traditional marketing channels to non-traditional channels, as well as the emergence of new media outlets utilizing interactive technologies, have positively affected our business and our industry. Additionally, in an effort to gain greater efficiency and effectiveness from their total marketing dollars, clients are increasingly requiring greater coordination of marketing activities and concentrating these activities with a smaller number of service providers.

During previous periods of economic downturn and geopolitical unrest our industry experienced slower growth rates and industry-wide margin contraction. However, during these periods, we continued to invest in our businesses and our personnel and took action to reduce costs at some of our agencies to address these changing economic circumstances. Although future economic conditions are uncertain, as a result of these previous actions, our past experience during a slowing economy and the diversification of our businesses geographically and by service offering, we believe we can continue to invest in our business during periods of economic slowdown.

Given our size and breadth, we manage our business by monitoring several financial indicators. The key indicators that we review focus on revenue and operating expenses.

We analyze revenue growth by reviewing the components and mix of the growth, including growth by major geographic location, growth by major marketing discipline, growth from currency fluctuations, growth from acquisitions and growth from our largest clients.

In recent years, our revenue has been divided almost evenly between domestic and international operations. For the three months ended June 30, 2008, our overall revenue growth was 11.2%, of which 5.2% was related to changes in foreign exchange rates and 1.2% was related to the acquisition of entities, net of entities disposed. The remaining 4.8% was organic growth. For the six months ended June 30, 2008, our overall revenue growth was 11.8%, of which 5.2% was related to changes in foreign exchange rates and 1.1% was related to the acquisition of entities, net of entities disposed. The remaining 5.6% was organic growth.

We measure operating expenses in two distinct cost categories: salary and service costs, and office and general expenses. Salary and service costs are primarily comprised of employee compensation related costs and office and general expenses are primarily comprised of rent and occupancy costs, technology related costs and depreciation and amortization. Each of our agencies requires service professionals with a skill set that is common across our disciplines. At the core of this skill set is the ability to understand a client's brand and its selling proposition, and the ability to develop a unique message to communicate the value of the brand to the client's target audience. The facility requirements of our agencies are also similar across geographic regions and disciplines, and their technology requirements are generally limited to personal computers, servers and off-the-shelf software.

Because we are a service business, we monitor salary and service costs and office and general costs as a percentage of revenue. Salary and service costs tend to fluctuate in conjunction with changes in revenue. Office and general expenses, which are not directly related to servicing clients, are less directly linked to changes in our revenues than salary and service costs. These costs tend to increase as revenue increases, however, the rate of increase in these expenses could be more or less than the rate of increase in our revenues. During the second quarter of 2008 and the second quarter of 2007, salary and service costs remained flat at 69.5% of revenue and in the first six months of 2008, salary and service costs increased slightly to 71.1% from 70.8% of revenue during the first six months of 2007. This level of expense corresponds with increased revenue levels and the necessary increases in direct salaries, salary-related costs and freelance labor necessary to deliver our services and pursue new business initiatives. Office and general expenses were 15.6% of revenue in the second quarter of 2008, as compared to 15.8% in 2007, as these costs are less directly linked to changes in our revenues. The reduction is consistent with our efforts to increase the variability of our cost structure and continue to align our costs with business levels on a location-by-location basis. Similarly, in the first six months of 2008, office and general expenses declined slightly to 15.9% of revenue in the first six months of 2008 from 16.2% in the first six months of 2007.

Our net income in the second quarter of 2008 increased $30.3 million, or 11.0%, to $307.0 million from $276.7 million in the second quarter of 2007. Our net income in the first six months of 2008 increased $55.9 million, or 12.2%, to $515.6 million from $459.7 million in the first six months of 2007. Diluted earnings per share increased 14.3% to $0.96 in the second quarter of 2008, as compared to $0.84 in the prior year period. Diluted earnings per share increased 16.7% to $1.61 in the first six months of 2008, as compared to $1.38 in the prior year period. This period-over-period increase resulted from the increase in net income for the reasons described above, as well as the

impact of the reduction in our weighted average common shares outstanding. This reduction was the result of our purchases throughout 2007 and during the first quarter of 2008 of treasury shares, net of stock option exercises and shares issued under our employee stock purchase plan.

Results of Operations: Second Quarter 2008 Compared to Second Quarter 2007

Revenue: When comparing performance between quarters and years, we discuss non-GAAP financial measures such as the impact that foreign currency rate changes, acquisitions / dispositions and organic growth have on reported revenue. We derive significant revenue from international operations and changes in foreign currency rates between the years impact our reported results. Our reported results are also impacted by our acquisitions and disposition activity and organic growth. Accordingly, we provide this information to supplement the discussion of changes in revenue period-to-period.

Our second quarter of 2008 consolidated worldwide revenue increased 11.2% to $3,476.9 million from $3,126.1 million in the comparable period last year. The effect of foreign exchange impacts increased worldwide revenue by $162.9 million. Acquisitions, net of disposals, increased worldwide revenue by $38.0 million in the second quarter of 2008 and organic growth increased worldwide revenue by $149.9 million. The components of the second quarter 2008 revenue growth in the U.S. ("domestic") and the remainder of the world ("international") are summarized below (dollars in millions):

                                          Total               Domestic        International
                                    ------------------     ---------------   ----------------
                                          $        %           $        %        $        %
                                      ---------   ----     ---------   ---   ---------   ----
  Quarter ended June 30, 2007         $ 3,126.1      -     $ 1,659.7     -   $ 1,466.4      -

  Components of revenue changes:
  Foreign exchange impact                 162.9    5.2 %           -     -       162.9   11.1 %
  Acquisitions, net of dispositions        38.0    1.2 %        19.9   1.2 %      18.1    1.2 %
  Organic growth                          149.9    4.8 %        71.7   4.3 %      78.2    5.3 %
                                      - -------   ----   - - -------   ---   - -------   ----

  Quarter ended June 30, 2008         $ 3,476.9   11.2 %   $ 1,751.3   5.5 % $ 1,725.6   17.7 %
                                      - -------   ----     - -------   ---   - -------   ----

The components and percentages are calculated as follows:

º The foreign exchange impact component shown in the table is calculated by first converting the current period's local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $3,314.0 million for the Total column in the table). The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency (in this case $3,476.9 million less $3,314.0 million for the Total column in the table).
º The acquisitions component shown in the table is calculated by aggregating the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period.
º The organic component shown in the table is calculated by subtracting both the foreign exchange and acquisition revenue components from total revenue growth.

º The percentage change shown in the table of each component is calculated by dividing the individual component amount by the prior period revenue base of that component (in this case $3,126.1 million for the Total column in the table).

The components of revenue for the second quarter of 2008 and revenue growth compared to the second quarter of 2007 in our primary geographic markets are summarized below (dollars in millions):

                                         Revenue   % Growth
                                        --------- ----------
                         United States  $ 1,751.3     5.5 %
                         Euro Markets       798.6    19.6 %
                         United Kingdom     345.9    (0.4 )%
                         Other              581.1    28.8 %
                                        - -------    ----
                         Total          $ 3,476.9    11.2 %
                                        - -------    ----

As indicated, foreign exchange impacts increased our international revenue by 11.1%, or $162.9 million, during the quarter ended June 30, 2008. The most significant impacts resulted from the strengthening of the Euro, Canadian Dollar, Australian Dollar, Japanese Yen and Brazilian Real against the U.S. Dollar, offset by strengthening of the U.S. Dollar against the British Pound and Korean Won.

Driven by our clients' continuous demand for more effective and efficient branding activities, we strive to provide an extensive range of advertising, marketing and corporate communications services through various client-centric networks that are organized to meet specific client objectives. These services include advertising, brand consultancy, crisis communications, corporate social responsibility consulting, custom publishing, database management, digital and interactive marketing, direct marketing, directory advertising, entertainment marketing, environmental design, experiential marketing, field marketing, financial/corporate business-to-business advertising, graphic arts, healthcare communications, instore design, investor relations, marketing research, media planning and buying, mobile marketing services, multi-cultural marketing, non-profit marketing, organizational communications, package design, product placement, promotional marketing, public affairs, public relations, recruitment communications, reputation consulting, retail marketing, search engine marketing and sports and event marketing. In an effort to monitor the changing needs of our clients and to further expand the scope of our services to key clients, we monitor revenue across a broad range of disciplines and group them into the following four categories as summarized below: traditional media advertising, CRM, public relations and specialty communications (dollars in millions).

                               2nd Quarter    % of    2nd Quarter    % of      $       %
                                  2008      Revenue      2007      Revenue  Growth  Growth
                              ------------- -------- ------------- -------- ------- -------
Traditional media advertising  $    1,499.9   43.1 %  $    1,366.5   43.7 % $ 133.4   9.8 %
CRM                                 1,313.8   37.8 %       1,121.0   35.9 %   192.8  17.2 %
Public relations                      333.4    9.6 %         321.7   10.3 %    11.7   3.7 %
Specialty communications              329.8    9.5 %         316.9   10.1 %    12.9   4.1 %
                              -- ----------          -- ----------          - -----
                               $    3,476.9           $    3,126.1          $ 350.8  11.2 %
                              -- ----------          -- ----------          - -----

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS (Continued)

   Operating Expenses: Our second quarter 2008 worldwide operating expenses
increased $295.6 million, or 11.1%, to $2,960.1 million from $2,664.5 million in
the second quarter of 2007, as shown below (dollars in millions):

                                          Three Months Ended June 30,
                 ------------------------------------------------------------------------------
                              2008                           2007                2008 vs 2007
                 ------------------------------ ------------------------------ ----------------
                                        % of                           % of
                              %        Total                 %        Total
                             of      Operating              of      Operating     $        %
                      $    Revenue    Expenses       $    Revenue    Expenses   Growth  Growth
                   ------- -------                ------- -------   ---------- -------- -------
Revenue          $ 3,476.9                      $ 3,126.1                       $ 350.8  11.2 %

Operating
Expenses:
       Salary
and service
costs              2,416.3    69.5 %     81.6 %   2,171.8    69.5 %     81.5 %    244.5  11.3 %
       Office
and general
expenses             543.8    15.6 %     18.4 %     492.7    15.8 %     18.5 %     51.1  10.4 %
                 - ------- -------   --------   - ------- -------   --------   -- -----
Total Operating
Expenses           2,960.1    85.1 %              2,664.5    85.2 %               295.6  11.1 %

Operating Profit $   516.8    14.9 %            $   461.6    14.8 %             $  55.2  12.0 %
                 - -------                      - -------                      -- -----

Because we provide professional services, salary and service costs represent the largest part of our operating expenses. During the second quarter of 2008, we continued to invest in our businesses and their professional personnel. As a percentage of total operating expenses, salary and service costs were 81.6% in the second quarter of 2008 and 81.5% in the second quarter of 2007. These costs are comprised of salary and related costs and direct service costs. Most, or $244.5 million and 82.7%, of the $295.6 million increase in total operating expenses in the second quarter of 2008 resulted from increases in salary and service costs. This increase was attributable to the increase in our revenue in the second quarter of 2008 and the necessary increases in the direct costs required to deliver our services and pursue new business initiatives, including direct salaries, salary related costs and direct service costs, including freelance labor costs and direct administrative costs, such as travel, partially offset by a reduction in incentive compensation. As a result, salary and service costs as a percentage of revenue were flat at 69.5% in the second quarter of 2007 and the second quarter of 2008.

Office and general expenses represented 18.4% and 18.5% of our operating expenses in the second quarter of 2008 and 2007, respectively. These costs are comprised of office and equipment rents, technology costs and depreciation, amortization of identifiable intangible assets, professional fees and other overhead expenses. As a percentage of revenue, office and general expenses were 15.6% in the second quarter of 2008 and 15.8% in the second quarter of 2007. These costs are less directly linked to changes in our revenues than our salary and service costs. This reduction reflects our efforts to align our costs with business levels on a location-by-location basis. Although they tend to increase as our revenues increase, the rate of increase could be more, or less than the rate of increase in our revenues.

Net Interest Expense: Our net interest expense decreased in the second quarter of 2008 to $18.7 million, as compared to $22.2 million in the second quarter of 2007. This decrease was related primarily to interest expense savings in the second quarter of 2008 associated with reductions in the amortization, in accordance with Emerging Issues Task Force ("EITF") No. 96-19, Debtor's Accounting for a Modification or Exchange of Debt Instruments ("EITF 96-19"), of supplemental interest payments which were made on our Zero Coupon Zero Yield Convertible Notes due 2032 ("2032 Notes") in prior periods, as well as increased interest income earned. These savings were partially offset by amortization of supplemental interest payments made in the first quarter of 2008 on our 2031 Notes which were not made in the first quarter of 2007 and additional interest expense from our Euro and Yen swaps during the quarter.

Income Taxes: Our consolidated effective income tax rate was 33.6% in the second quarter of 2008, which is slightly lower than the second quarter 2007 rate of 33.9%.

Earnings Per Share (EPS): For the foregoing reasons, our net income in the second quarter of 2008 increased $30.3 million, or 11.0%, to $307.0 million from $276.7 million in the second quarter of 2007. Diluted earnings per share increased 14.3% to $0.96 in the second quarter of 2008, as compared to $0.84 in the prior year period. This period-over-period increase resulted from the 11.0% increase in net income for the reasons described above, as well as the impact of the reduction in our weighted average common shares outstanding. This reduction was the result of our purchases throughout 2007 and the first quarter of 2008 of treasury shares, net of stock option exercises and shares issued under our employee stock purchase plan.

Results of Operations: First Six Months of 2008 Compared to First Six Months of 2007

Revenue: Our first six months of 2008 consolidated worldwide revenue increased 11.8% to $6,672.3 million from $5,966.7 million in the comparable period last year. The effect of foreign exchange impacts increased worldwide revenue by $308.5 million. Acquisitions, net of disposals, increased worldwide revenue by $65.9 million in the first six months of 2008 and organic growth increased worldwide revenue by $331.2 million. The components of the first six months of 2008 revenue growth in the U.S. ("domestic") and the remainder of the world ("international") are summarized below (dollars in millions):

                                          Total             Domestic       International
                                     ----------------     -------------   ----------------
                                         $        %          $       %        $        %
                                     ---------   ----     -------   ---   ---------   ----
   Six months ended June 30, 2007    $ 5,966.7      -   $ 3,203.5     -   $ 2,763.2      -

   Components of revenue changes:
   Foreign exchange impact               308.5    5.2 %         -     -       308.5   11.2 %
   Acquisitions, net of dispositions      65.9    1.1 %      33.9   1.1 %      32.0    1.2 %
   Organic growth                        331.2    5.6 %     175.1   5.5 %     156.1    5.6 %
                                     - -------   ----   - -------   ---   - -------   ----

   Six months ended June 30, 2008    $ 6,672.3   11.8 % $ 3,412.5   6.5 % $ 3,259.8   18.0 %
                                     - -------   ----   - -------   ---   - -------   ----

The components and percentages are calculated as follows:

º The foreign exchange impact component shown in the table is calculated by first converting the current period's local currency revenue using the average exchange rates from the equivalent prior period to arrive at a constant currency revenue (in this case $6,363.8 million for the Total column in the table). The foreign exchange impact equals the difference between the current period revenue in U.S. dollars and the current period revenue in constant currency (in this case $6,672.3 million less $6,363.8 million for the Total column in the table).
º The acquisitions component shown in the table is calculated by aggregating the applicable prior period revenue of the acquired businesses. Netted against this number is the revenue of any business included in the prior period reported revenue that was disposed of subsequent to the prior period.
º The organic component shown in the table is calculated by subtracting both the foreign exchange and acquisition revenue components from total revenue growth.
º The percentage change shown in the table of each component is calculated by dividing the individual component amount by the prior period revenue base of that component (in this case $5,966.7 million for the Total column in the table).

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS (Continued)

   The components of revenue for the first six months of 2008 and revenue growth
compared to the first six months of 2007 in our primary geographic markets are
summarized below (dollars in millions):

                                         Revenue   % Growth
                                        --------- ----------
                         United States  $ 3,412.5      6.5 %
                         Euro Markets     1,499.6     20.6 %
                         United Kingdom     688.9      2.3 %
                         Other            1,071.3     26.5 %
                                        - -------     ----
                         Total          $ 6,672.3     11.8 %
                                        - -------     ----

As indicated, foreign exchange impacts increased our international revenue by 11.2%, or $308.5 million during the six months ended June 30, 2008. The most significant impacts resulted from the strengthening of the Euro, Canadian Dollar, Australian Dollar, Japanese Yen and Brazilian Real against the U.S. Dollar.

In an effort to monitor the changing needs of our clients and to further expand the scope of our services to key clients, we monitor revenue across a broad range of disciplines and group them into the following four categories as summarized below: traditional media advertising, CRM, public relations and specialty communications (dollars in millions).

                                Six Months    % of    Six Months    % of      $       %
                                   2008     Revenue      2007     Revenue  Growth  Growth
                               ------------ -------- ------------ -------- ------- -------
 Traditional media advertising  $   2,891.2   43.3 %  $   2,592.3   43.5 % $ 298.9  11.5 %
 CRM                                2,481.3   37.2 %      2,137.7   35.8 %   343.6  16.1 %
 Public relations                     648.4    9.7 %        615.8   10.3 %    32.6   5.3 %
 Specialty communications             651.4    9.8 %        620.9   10.4 %    30.5   4.9 %
                               -- ---------          -- ---------          - -----
                                $   6,672.3           $   5,966.7          $ 705.6  11.8 %
                               -- ---------          -- ---------          - -----

Operating Expenses: Our first six months of 2008 worldwide operating expenses increased $615.1 million, or 11.9%, to $5,804.7 million from $5,189.6 million in the first six months of 2007, as shown below (dollars in millions):

                                            Six Months Ended June 30,
               -----------------------------------------------------------------------------------
                             2008                             2007                 2008 vs 2007
               -------------------------------- -------------------------------- -----------------
                                        % of                             % of
                               %       Total                    %       Total
. . .