NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

1.

Basis of Presentation
In the opinion of management, the financial statements included herein contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, results of operations and cash flows at June 30, 2002 and for all periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in The Interpublic Group of Companies, Inc.'s (the "Company" or "Interpublic") December 31, 2001 Annual Report to Stockholders filed on Form 10-K/A. The operating results for the first six months of the year are not necessarily indicative of the results for the year or other interim periods.

Additionally, as discussed in Note 2, the Company identified total charges of $181.3 that are related to prior periods. The total amount of charges has been recorded through a restatement of previously reported amounts.

Certain prior year amounts have been reclassified to conform with current year presentation. Additionally, as discussed in Note 7 below, the consolidated statement of operations is not comparable to the prior year reflecting a change in accounting principle pursuant to Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

2.

Restatement
During the second and third quarters of 2002, the Company identified total charges of $181.3 ($135.9, net of tax) that are related to prior periods. The total amount of charges has been recorded through a restatement of previously reported amounts in this Form 10-Q/A. Of the total amount of charges, $18.2 related to the six months ended June 30, 2002 and $12.4 related to the six months ended June 30, 2001.

As a result of a review undertaken surrounding the process of internally allocating certain overhead costs and reimbursable charges to operating units throughout the world, the Company identified and recorded $101.0 of intracompany charges. The review related to McCann-Erickson WorldGroup ("McCann"). Cost allocations are performed by McCann in order to, among other things, satisfy regulatory authorities and measure client account profitability. The charges were principally in Europe and had been included in accounts receivable and work-in-progress rather than being expensed.

In addition to the intracompany charges, the Company identified an additional $36.3 at McCann principally related to estimates of insurance proceeds not yet realized, specific write-offs of receivables and work-in progress, costs that had been capitalized rather than expensed and other items. An additional $44.0 at subsidiaries other than McCann was identified. The largest component of the total was $30.3 related to understated liabilities, which the Company has concluded date back to 1996 and prior, at a subsidiary within The Partnership. The understated liabilities were identified as a result of the Company changing a subsidiary ledger system. Additionally, the Company identified $8.7 related to revenue and cost recognition adjustments at a subsidiary of Interpublic Sports and Entertainment Group.

As a result of the reviews undertaken, the Company is in the process of terminating certain employees, implementing other personnel changes and strengthening certain control processes in order to prevent the situations leading to the restatement from recurring.

See Note 13 for a description of waivers that have been secured to ensure compliance with credit agreements and a discussion of certain liquidity matters.

The Company has been informed by the Securities and Exchange Commission staff that it is conducting an informal inquiry into the matters discussed above. The Company is cooperating fully with the inquiry.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

The table below presents a summary of the impact of restating the statements of financial operations for the three and six months ended June 30, 2002 and 2001, and the balance sheet as of June 30, 2002 and December 31, 2001.

CONSOLIDATED STATEMENT OF OPERATIONS

As
Previously
Reported (a)

As
Restated

Three months ended June 30, 2002

     - Operating income

$  238.5   

$  228.9   

     - Net income

$  117.0   

$  111.3   

     - Earnings per share - Basic

$    0.31   

$    0.30   

     - Earnings per share - Diluted

$    0.31   

$    0.29   

Six months ended June 30, 2002

     - Operating income

$  378.6   

$  360.4   

     - Net income

$  183.7   

$  173.0   

     - Earnings per share - Basic

$    0.49   

$    0.46   

     - Earnings per share - Diluted

$    0.48   

$    0.45   

Three months ended June 30, 2001

     - Operating loss

$  (26.2)   

$  (33.7)  

     - Net loss

$(110.2)   

$(116.3)  

     - Loss per share - Basic

$  (0.30)   

$  (0.32)  

     - Loss per share - Diluted

$  (0.30)   

$  (0.32)  

Six months ended June 30, 2001

     - Operating income

$  126.9   

$  115.9   

     - Net loss

$(139.0)  

$(146.7)  

     - Loss per share - Basic

$  (0.38)  

$  (0.40)  

     - Loss per share - Diluted

$  (0.38)  

$  (0.40)  

CONSOLIDATED BALANCE SHEET

June 30, 2002

CURRENT ASSETS:

  Cash and cash equivalents

$     537.3   

$     537.3  

  Accounts receivable

4,959.2   

4,913.8  

  Other current assets

       910.4   

       894.9  

TOTAL CURRENT ASSETS

$  6,406.9   

$  6,346.0  

TOTAL ASSETS

$11,772.6   

$11,700.6  

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

  Accounts payable and accrued expenses

$  5,791.7   

$  5,828.8  

  Loans payable

598.6   

598.6  

  Accrued income taxes

        48.4   

        31.4  

    TOTAL CURRENT LIABILITIES

$  6,438.7   

$  6,458.8  

NON-CURRENT LIABILITIES

$  3,050.2   

$  3,050.2  

STOCKHOLDERS' EQUITY

$  2,283.7   

$  2,191.6  

TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY

$11,772.6   

$11,700.6  

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

As
Previously
Reported (a)

As
Restated

December 31, 2001

CURRENT ASSETS:

  Cash and cash equivalents

$     935.2   

$      935.2 

  Accounts receivable

4,780.5   

4,674.9 

  Other current assets

       751.5   

       743.1 

TOTAL CURRENT ASSETS

$  6,467.2   

$  6,353.2 

TOTAL ASSETS

$11,514.7   

$11,390.5 

LIABILITIES AND STOCKHOLDERS' EQUITY:

CURRENT LIABILITIES:

  Accounts payable and accrued expenses

$  5,841.7   

$  5,876.8 

  Loans payable

453.1   

453.1 

  Accrued income taxes

103.1   

65.2 

  Dividends payable

         36.0   

         36.0 

    TOTAL CURRENT LIABILITIES

$  6,433.9   

$  6,431.1 

NON-CURRENT LIABILITIES

$  3,101.5   

$  3,101.5 

STOCKHOLDERS' EQUITY:

$  1,979.3   

$  1,857.9 

TOTAL LIABILITIES AND
   STOCKHOLDERS' EQUITY

$11,514.7   

$11,390.5 

(a)  Of the $181.3 ($135.9, net of tax) restatement amount, $68.5 ($40.1, net of tax) was previously reported as income statement adjustments in the June 30, 2002 Form 10-Q. Also included in the restated stockholders' equity is a $3.7 adjustment to foreign currency translation adjustments. The amounts noted above "as previously reported" were derived from the amounts reflected in the June 30, 2002 Form 10-Q.

3.

Earnings (Loss)Per Share
The following sets forth the computation of earnings per share for the three and six month periods ended June 30, 2002 and 2001:

Three Months Ended June 30,

2002
(Restated)

2001
(Restated)

Basic

Net income (loss)

$ 111.3    

$(116.3)   

Weighted average number of common shares outstanding

  375.7    

    368.9    

Earnings (loss) per share

$  0.30    

$  (0.32)   

Diluted (a)

Net income (loss)

$111.3    

$(116.3)   

Addback income on assumed conversion of subordinated notes

       --    

           --    

Net income (loss) - diluted

$111.3    

$(116.3)   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

Weighted average number of common shares outstanding

375.7    

368.9    

Weighted average number of incremental shares
   in connection with assumed conversion
   of subordinated notes

--    

--    

Weighted average number of incremental shares

   in connection with restricted stock

   and assumed exercise of stock options

     6.7    

           --    

Weighted average number of common shares outstanding - diluted

  382.4    

    368.9    

Earnings (loss) per share - diluted

$  0.29    

$  (0.32)   

(a)

The computation of diluted EPS for 2002 excludes the assumed conversion of the 1.8% and 1.87% Convertible Subordinated Notes because they were anti-dilutive. The computation of diluted EPS for 2001 excludes the assumed conversion of the 1.80% and 1.87% Convertible Subordinated Notes, the conversion of restricted stock and assumed exercise of stock options because they were antidilutive.

Six Months Ended June 30,

 2002
 (Restated)

2001
(Restated)

Basic

Net income (loss)

$ 173.0    

$(146.7)   

Weighted average number of common shares outstanding

  374.3    

  367.5    

Earnings (loss) per share

$  0.46    

$ (0.40)   

Diluted (b)

Net income (loss)

$173.0    

$(146.7)   

Weighted average number of common shares outstanding

374.3    

367.5    

Weighted average number of incremental shares

   in connection with restricted stock

   and assumed exercise of stock options

     6.8    

        --    

Weighted average number of common shares outstanding - diluted

  381.1    

  367.5    

Earnings (loss) per share - diluted

$  0.45    

$ (0.40)   

(b)

The computation of diluted EPS for 2002 and 2001 excludes the assumed conversion of the 1.8% and 1.87% Convertible Subordinated Notes because they were anti-dilutive. The computation of diluted EPS for 2001 excludes the conversion of restricted stock and assumed exercise of stock options because they were antidilutive.

4.

Following the completion of the True North acquisition in June 2001, the Company initiated a series of operational initiatives focusing on: a) the integration of the True North operations and the identification of synergies and savings, b) the realignment of certain Interpublic businesses and c) productivity initiatives to achieve higher operating margins. In connection with the operational initiatives, the Company executed a wide-ranging restructuring plan that included severance, lease terminations and other actions. The total amount of the charges incurred in 2001 in connection with the plan was $645.6.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

A summary of the remaining liability for restructuring and other merger related costs is as follows:

Balance at
December
   31, 2001   

Cash paid
through
June
  30, 2002  

Liability
at June
  30, 2002  

          TOTAL BY TYPE

          Severance and termination costs

$154.0        

$  94.2       

$  59.8       

          Lease termination and other exit costs

  157.1        

  39.4       

  117.7       

          Total

$311.1        

$133.6       

$177.5       

As of June 30, 2002, the Company expects that 7,500 employees will be terminated in connection with the restructuring plan. Of that total, the majority of severance actions have occurred with the remainder to occur by the end of September. A significant portion of severance liabilities are expected to be paid out over a period of up to one year.

The employee groups affected by the restructuring program include all levels and functions across the Company: executive, regional and account management, administrative, creative and media production personnel. Approximately half of the headcount reductions relate to the U.S., one third relate to Europe (principally the UK, France and Germany), with the remainder relating to Latin America and Asia Pacific.

Lease termination costs, net of estimated sublease income, relate to the offices that have been or will be vacated as part of the restructuring. The Company plans to downsize or vacate approximately 180 locations and expects that all leases will have been terminated or the premises vacated or subleased by September 30, 2002. The cash portion of the charge will be paid out over a period of up to five years. The geographical distribution of offices to be vacated is similar to the geographical distribution of the severance charges. Lease termination and related costs include write-offs related to the abandonment of leasehold improvements as part of the office vacancies.

Other exit costs relate principally to the impairment loss on sale or closing of certain business units in the U.S. and Europe. In the aggregate, the businesses being sold or closed represent an immaterial portion of the revenue and operating profit of the Company. The write-off amount was computed based upon the difference between the estimated sales proceeds (if any) and the carrying value of the related assets. The sales and closures had been completed by June 30, 2002.

5.

Goodwill Impairment and Other Charges
In 2001, the Company determined that the goodwill attributable to certain acquisitions was in excess of its estimates of the entities' future cashflows. As a result, an impairment charge of $303.1 ($263.4, net of tax) had been recorded in 2001. Of the total write-off, $221.4 was recorded in the second quarter of 2001, with the remainder recorded in the third quarter of 2001. The largest components of the goodwill impairment and other charges were Capita Technologies, Inc. (approximately $145) and Zentropy Partners (approximately $16), both internet services businesses. The remaining amount primarily related to several other businesses including internet services, healthcare consulting, and certain advertising offices in Europe and Asia Pacific.

6.

Investment Impairment
During the first quarter of 2001 the Company recorded a charge of $160.1 related to the impairment of investments primarily in publicly traded internet-related companies, including marchFIRST, Inc. (an internet professional services firm), which had filed for relief under Chapter 11 of the Federal Bankruptcy Code in April 2001. The impairment charge adjusted the carrying value of investments to the estimated market value.

During the second quarter of 2002, the Company recorded investment impairment charges of $16.2, primarily relating to certain investments of Octagon, a sports marketing company.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

7.

New Accounting Standards
In June 2001, the Financial Accounting Standards Board ("FASB") issued Statements of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"), and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). These statements were effective for fiscal years beginning after December 15, 2001. Under the new standards, the purchase method of accounting is required for all business combinations initiated after June 30, 2001 and goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be amortized over their estimated useful lives.

During the first quarter of 2002, the Company performed the required impairment tests of goodwill and determined that there was no impairment required to be recognized upon adoption. The Company estimates that, based on its current intangible assets, amortization expense will be approximately $6.0 to $8.0 in each of the next five years.

In connection with SFAS 142, goodwill amortization ceased effective January 1, 2002. The following analysis shows the impact on the Company's statement of operations had SFAS 142 been effective for all periods presented:

Three Months Ended
June 30,

Six Months Ended
June 30,

  2002
(Restated)

2001
(Restated)

  2002
(Restated)

2001
(Restated)

Reported net income (loss)

$111.3  

$(116.3)   

$173.0   

$(146.7)  

Add back: goodwill amortization, net of tax

       --  

   35.0    

       --   

   70.3   

Adjusted net income (loss)

$111.3  

$ (81.3)   

$173.0   

$ (76.4)  

Basic earnings (loss) per share:

   Reported earnings (loss)

$0.30  

$(0.32)   

$0.46   

$(0.40)  

   Add back: goodwill amortization, net of tax

       --  

   0.10    

       --   

   0.19   

   Adjusted earnings (loss)

$0.30  

$(0.22)   

$0.46   

$(0.21)  

Diluted earnings (loss) per share:

   Reported earnings (loss)

$0.29  

$(0.32)   

$0.45   

$(0.40)  

   Add back: goodwill amortization, net of tax

       --  

   0.10    

       --   

   0.19   

   Adjusted earnings (loss)

$0.29  

$(0.22)   

$0.45   

$(0.21)  

In June 2001, Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations ("SFAS 143") was issued. SFAS 143 addresses financial accounting and reporting for legal obligations associated with the retirement of tangible long-lived assets and the associated retirement costs that result from the acquisition, construction, or development and normal operation of a long-lived asset. Upon initial recognition of a liability for an asset retirement obligation, SFAS 143 requires an increase in the carrying amount of the related long-lived asset. The asset retirement cost is subsequently allocated to expense using a systematic and rational method over the asset's useful life. SFAS 143 is effective for fiscal years beginning after June 15, 2002. The adoption of this statement is not expected to have an impact on the Company's financial position or results of operations.

In August 2001, Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets ("SFAS 144") was issued. SFAS 144 supersedes Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets to be Disposed of ("SFAS 121"), and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions. SFAS 144 also amends ARB (Accounting Research Bulletins) No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

SFAS 144 retains the fundamental provisions of SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while resolving significant implementation issues associated with SFAS 121. Among other things, SFAS 144 provides guidance on how long-lived assets used as part of a group should be evaluated for impairment, establishes criteria for when long-lived assets are held for sale, and prescribes the accounting for long-lived assets that will be disposed of other than by sale. SFAS 144 is effective for fiscal years beginning after December 15, 2001. The adoption of this statement did not have an impact on the Company's financial position or results of operations.

In November 2001, the Emerging Issues Task Force reached a consensus on Issue No. 01-14, Income Statement Characterization of Reimbursements Received for "Out-of-Pocket" Expenses Incurred ("EITF 01-14"). EITF 01-14 establishes that reimbursements received for certain out-of-pocket expenses should be reported as revenue and operating expenses in the statement of operations. Historically, the Company classified reimbursed out-of-pocket expenses as a reduction of operating expenses. The Company has adopted this guidance effective the first quarter of fiscal year 2002.

In June 2002, Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146") was issued. SFAS 146 changes the measurement and timing of recognition for exit costs, including restructuring charges, and is effective for any such activities initiated after December 31, 2002. It has no effect on charges recorded for exit activities begun prior to this date.

8.

Derivative and Hedging Instruments
Interest Rate Swaps
At June 30, 2002, the Company had outstanding interest rate swap agreements covering all of the $500.0, 7.875% notes due October 2005. The fair value of the hedges at June 30, 2002 was an asset of approximately $19.9.

Hedges of Net Investments
The Company has repaid the Euro borrowings that, as of December 31, 2001, had been designated as a hedge of a net investment.

Forward Contracts
As of June 30, 2002, the Company had contracts covering approximately $34.8 of notional amount of currency. As of June 30, 2002, the fair value of the forward contracts was an asset of $3.0.

Other
The Company has two embedded derivative instruments under the terms of the offering of Zero-Coupon Convertible Notes. At June 30, 2002, the fair value of the two derivatives was negligible.

9.

Segment Information
During the second quarter of 2002, the Company reorganized its operations. Prior to the second quarter the Company was organized into four global operating groups: a) McCann-Erickson WorldGroup ("McCann"), b) the FCB Group ("FCB"), c) The Partnership and d) Advanced Marketing Services ("AMS"). In the second quarter, the Company carved out certain operations related to certain sports and event planning activities and combined them to form a fifth global operating group, IPG Sports and Entertainment ("S&E"). Each of McCann, FCB, The Partnership, AMS and S&E operate with the same business objective which is to provide clients with a wide variety of services that contribute to the delivery of a message and to the maintenance or creation of a brand. However, the Partnership and AMS historically have had lower gross margins than the Company average. The five global operating groups share numerous clients, have similar cost structures, provide services in a similar fashion and draw their employ ee base from the same sources. The annual margins of each of the five groups may vary due to global economic conditions, client spending and specific circumstances such as the Company's restructuring activities. However, based on the respective future prospects of the five groups, the Company believes that the long-term average gross margin of each of these five groups will converge over time and, given the similarity of the operations, the five groups have been aggregated.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

10.

Acquisitions and Deferred Payments
During the first six months of 2002 the Company has completed 8 acquisitions. The companies acquired included those in the U.S. and Europe and included healthcare, public relations, direct marketing and research companies. In connection with these acquisitions, the Company paid $43.1 in cash and issued shares with a value of $1.1. Additionally, the Company paid $2.0 in cash and $0.8 in stock for additional ownership interests in companies in which a previous investment had been made. In connection with the acquisitions, approximately $4.5 of cash was acquired.

During the first six months of 2002 the Company paid $165.9 in cash and $42.5 in stock as deferred payments on acquisitions that had closed in prior years. During the first six months of 2001 the Company paid $78.0 in cash and $29.7 in stock as deferred payments on acquisitions that had closed in prior years.

As of June 30, 2002, the Company's estimated liability for earn-outs is as follows:

2002

2003

2004

2005 and after

Total

Cash

$46.9

$120.4         

$72.1

$66.6

$306.0

Stock

  30.6

    26.5         

  10.1

  19.4

     86.6

   Total

$77.5

$146.9         

$82.2

$86.0

$392.6

The amounts above are estimates based on the current projections as to the amount that will be paid and are subject to revisions as the earn-out periods progress.

In addition to the estimated liability for earn-outs, the Company has entered into agreements that require the Company to purchase additional equity interests in certain companies (put options). In many cases, the Company also has the option to purchase the additional equity interests (call options) in certain circumstances. The total amount of potential payments under put options is as follows:

Exercisable
as of
June 30, 2002

Not
Exercisable

Total

Cash

$12.4

$167.4         

$179.8

Stock

     4.1

    24.5         

     28.6

   Total

$16.5

$191.9         

$208.4

The expected maturity of the $208.4 is as follows: 2002 - $21.7; 2003 - $60.0; 2004 - $17.0; 2005 and thereafter - $109.7. The actual amount to be paid is contingent upon the achievement of projected operating performance targets and satisfying other conditions as specified in the relevant agreement.

The Company also has call options to acquire additional equity interests in companies in which it already has an ownership interest. The estimated amount that would be paid under such call options is $43.5 and, in the event of exercise, would be paid as follows: 2002 - $0.8; 2003 - $17.8; 2004 - $4.9; 2005 thereafter - $20.0. The actual amount to be paid is contingent upon the achievement of projected operating performance targets and satisfying other conditions as specified in the relevant agreement.

11.

Debt
The Company's term loan agreements contain financial covenants that set minimum levels for net worth and for cash flow as a function of borrowed funds and maximum levels of borrowed funds as a function of net worth (as defined in these agreements). During the three months ended June 30, 2002, as a result of decreased cash flows and certain non-recurring charges for past quarters, the Company required and received amendments related to its financial covenants in the term loan agreements. In connection with the amendments, the Company agreed to a 0.5% increase in interest rates pertaining to $148.8 outstanding under the term loans. The Company believes that the additional interest payable is not material to the Company's financial position. At June 30, 2002, the Company was in compliance with all of its financial covenants in the term loan agreements, as amended.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

In addition, the Company has obtained waivers of certain provisions contained in its revolving credit agreements and term loan agreements relating to the restatement described in Note 2 to the Company's Consolidated Financial Statements.

12.

Commitments and Contingencies
The Company is involved in legal and administrative proceedings of various types. While any litigation contains an element of uncertainty, the Company believes that the outcome of such proceedings or claims will not have a material adverse effect on the Company.

The Internal Revenue Service (IRS) is currently examining the Company's federal income tax returns for 1994 to 1996. While the audit is not complete, the IRS has recently indicated its intention to challenge certain of the Company's tax positions. The Company believes that its tax positions comply with applicable tax law and intends to defend its positions vigorously. The ultimate disposition of these matters could require the Company to make additional payment to the IRS. Nonetheless, the Company believes that it has adequately provided for any foreseeable payments related to these matters and consequently does not anticipate any material earnings impact from the ultimate resolution of these matters.

13.

Subsequent Events

Debt and Certain Liquidity Matters
As a result of the restatement described in Note 2 to these consolidated financial statements, the Company required and received waivers to ensure compliance with credit agreements. The following discussion is based on amounts as of September 30, 2002, the most recent date for which a consolidated balance sheet has been filed on Form 10-Q.

As of September 30, 2002, the Company had two revolving credit facilities provided by a syndicate of banks (the "Revolving Credit Facilities") in an aggregate amount of $875.0, which are utilized to fund the Company's ordinary course business needs. The Revolving Credit Facilities bear interest rates at either a bank's base rate or LIBOR, at the Company's option. Furthermore, the interest rate on base rate loans is affected by the facilities' utilization levels, and the interest rate on LIBOR loans is affected by utilization levels and the Company's credit ratings. Based on the Company's current (December 13, 2002) credit ratings of BBB- and Baa3, as reported by Standard & Poor's and Moody's Investors Services, Inc., respectively, the current interest rate that the Company is paying for base rate loans is 4.25% and the interest spread with respect to LIBOR loans is 1.25%. At September 30, 2002, approximately $103.5 was borrowed under these facilities, and as of December 13, 2002, approxi mately $48.7 was borrowed. The Revolving Credit Facilities include financial covenants that set maximum levels of debt as a function of EBITDA and minimum levels of EBITDA as a function of interest expense (as defined in these agreements). As of September 30, 2002, the Company was in compliance with both of the financial covenants in the Revolving Credit Facilities.

The Company's note purchase agreements with The Prudential Insurance Company of America (the "Prudential Agreements") also contain financial covenants that set minimum levels for net worth and for cash flow as a function of borrowed funds and maximum levels of borrowed funds as a function of net worth (as defined in these agreements). Due to the impact on the Company's net worth resulting from (a) lower operating profit in the third quarter and (b) restructuring charges and lower operating profit in prior periods resulting from the restatement described in Note 2 to the Company's Consolidated Financial Statements, as of September 30, 2002, the Company required and received waivers related to its financial covenants in the Prudential Agreements.

In addition, the Company has obtained waivers of certain other provisions (excluding financial covenants) contained in its Revolving Credit Facilities and in certain of its term loan agreements, including the Prudential Agreements, which relate to the restatement. In connection with the waivers for its Revolving Credit Facilities, the Company agreed to an increase in interest rates and commitment fees payable to the lenders. In connection with the waivers for the Prudential Agreements, the Company agreed to increase the interest rates on the $148.8 outstanding under the Prudential Agreements. As a result, the current interest rates on the notes issued pursuant to the Prudential Agreements range from 7.55% to 9.51%. In addition to the increase in interest rates on the Prudential Agreements and the Revolving Credit Facilities, the Company paid fees to the lenders as additional consideration for their granting the waivers and amendments discussed above. The impact of the fees paid and the incr eased interest rates will not be material to the Company's financial position, cash flows or results of operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

The Company also agreed to amend the Revolving Credit Facilities and the Prudential Agreements prior to January 15, 2003 to include limitations that are mutually acceptable to the Company and the lenders on the ability of the Company (i) to make acquisitions or investments, (ii) to make capital expenditures, (iii) to declare or pay dividends and (iv) to repurchase shares or other debt securities. Until this amendment is effective, the Company agreed not to shorten the maturity or amortization of, or prepay any amounts under, its term loan agreements or any other long-term debt (other than (a) in connection with a debt refinancing having the same or later maturity or (b) prepayments pursuant to the terms of the Revolving Credit Facilities).

In addition to the Revolving Credit Facilities, at September 30, 2002, the Company had $65 of committed lines of credit, all of which was provided by overseas banks which participate in the Company's Revolving Credit Facilities. At September 30, 2002, approximately $57.2 was outstanding under these lines of credit.

At September 30, 2002 the Company also had $717.0 of uncommitted lines of credit, $459.9 of which was provided by banks which participate in the Company's Revolving Credit Facilities. At September 30, 2002, approximately $326.4 was outstanding under these uncommitted lines of credit. The Company's uncommitted borrowings are repayable upon demand.

At September 30, 2002, the Company had contingent obligations under guarantees and letters of credit issued by banks for the account of the Company and its subsidiaries in an aggregate amount of approximately $256.6.

The Company's liquidity in the third quarter of 2002 has been negatively impacted by lower profitability and issues resulting from the restatement. The Company believes that cash flow from operations, together with its availability under existing lines of credit and cash on hand, will be sufficient to fund the Company's working capital needs and other obligations on a timely basis. In the event additional funds are required, the Company believes it will have sufficient resources, including borrowing capacity and access to capital markets, to meet such requirements. Unanticipated decreases in cash flow from operations as a result of decreased demand for our services and other developments may require the Company to seek other sources of liquidity (including the disposition of certain non-core assets) and modify its operating strategies.

Legal Matters
Federal Securities Class Actions
Thirteen federal securities purported class actions were filed against The Interpublic Group of Companies, Inc. (referred to hereinafter as "Interpublic" the "Company" or the "Registrant") and certain of its present and former directors and officers by a purported class of purchasers of Interpublic stock shortly after the Company's August 13, 2002 announcement regarding the restatement of its previously reported earnings for the periods January 1, 1997 through March 31, 2002. The purported classes consist of Interpublic shareholders who purchased Interpublic stock in the period from October 1997 to August 2002. These lawsuits allege that Interpublic and certain of its present and former directors and officers made a series of false and misleading statements to its shareholders between October 1997 and August 2002, including the alleged failure to disclose the existence of additional charges that would need to be expensed and the lack of adequate internal financial controls, which allegedl y resulted in an overstatement of Interpublic's financial results during those periods. The suits allege that such false and misleading statements constitute violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder. No amount of damages is specified in the complaints. These actions, filed in the United States District Court for the Southern District of New York, were consolidated and lead counsel was appointed for all plaintiffs at a hearing on November 8, 2002. A consolidated complaint is due on December 20, 2002. A response to the complaint is due on January 31, 2003.

State Securities Class Actions
Two state securities purported class actions were filed against the Company and certain of its present and former directors and officers by a purported class of purchasers of Interpublic stock shortly after the Company's November 13, 2002 announcement regarding the restatement of its previously reported earnings for the periods January 1, 1997 through March 31, 2002. The purported classes consist of Interpublic shareholders who acquired Interpublic stock on or about June 25, 2001 in connection with Interpublic's acquisition of True North Communications, Inc. ("True North"). These lawsuits allege that Interpublic and certain of its present and former directors and officers made a series of false and misleading statements in connection with the filing of a

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in Millions, Except Per Share Amounts)
(Unaudited)

registration statement on May 9, 2001 in which Interpublic issued 67,644,272 shares of its common stock for the purpose of acquiring True North., including the alleged failure to disclose the existence of additional charges that would need to be expensed and the lack of adequate internal financial controls, which allegedly resulted in an overstatement of Interpublic's financial results at that time. The suits allege that such false and misleading statements constitute violations of Sections 11 and 15 of the Securities Act of 1933. No amount of damages is specified in the complaints. These actions, which have not yet been served, were filed in the Circuit Court of Cook County, Illinois.

State Derivative Actions
In addition to the federal lawsuits, four shareholder derivative suits have been filed. A suit was filed on September 4, 2002 in New York Supreme Court, New York County, by a single shareholder acting on behalf of the Company against the Board of Directors. The suit alleges a breach of fiduciary duties to Interpublic's shareholders. The complaint does not state a specific amount of damages. An amended complaint was due to be filed on December 13, 2002. Interpublic will have 45 days to respond. On October 24, 2002, another shareholder derivative suit was filed in Delaware Court of Chancery, New Castle County, by a single shareholder acting on behalf of the Company against the Board of Directors. This suit also alleges a breach of fiduciary duties to Interpublic's shareholders. The complaint does not state a specific amount of damages. A response to the complaint is due on December 20, 2002. On November 15, 2002, a suit was filed in Delaware Court of Chancery, New Castle County, by a single shareh older acting on behalf of the Company against the Board of Directors. The complaint in this suit has not yet been served. On November 26, 2002, a derivative suit was filed in the New York Supreme Court, New York County. Interpublic has not yet been served with the complaint in this action. The claims in these actions are substantially identical to the claims asserted in the two suits referenced above.

The Company intends to vigorously defend the actions discussed above. While the proceedings are in the early stages and contain an element of uncertainty, the Company has no reason to believe that the final resolution of the actions will have a material adverse effect on its financial condition.