dentsu annual report for the year ended march 31 2009

7/29/2019 Dentsu Annual Report for the Year Ended March 31 2009

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01

Forward-Looking Statements

This annual report contains statements that constitute forward-looking statements regarding the intent, belief or

current expectations of Dentsu Inc. or its management with respect to the results of operations and financial condition of

Dentsu or the Dentsu Group. Such forward-looking statements are not guarantees of future performance and involve risks

and uncertainties, and actual results may differ from those in the forward-looking statements as a result of various

factors. The information contained in this annual report identifies important factors that could cause such differences.

These forward-looking statements speak only as of the date hereof. Dentsu disclaims any obligation to update or publicly

announce any revisions to these forward-looking statements to reflect future events, conditions or circumstances.

Contents

02 Dentsu Group Corporate Philosophy03 Dentsu Group Companies05 Dentsu in Brief07 Operating Highlights09 To Our Shareholders11 Medium-Term Management Plan15 Special Features: Creative Ideas for Innovation21 Corporate Social Responsibility25 Corporate Governance33 Managements Discussion and Analysis of

Financial Conditions and Operational Results

44 Data Section


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Statement:

Ideas that reach beyond the imaginable.

Technology that crosses the bounds of possibilities.

Entrepreneurship that surpasses the expected.

Three sources of strength,

driving our innovation,

bringing positive change

to people and society.

02

The 3 Elements of Innovation

Entrepreneurship

+Ideas

+Technology

Slogan:

Good Innovation.

By Innovation we are talking about much more

than just technological innovation.

We mean generating new value for people

and society through a wide variety of changes.

Dentsu Group Corporate Philosophy

Good

Innovation.


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Dentsu (the parent company) provides services to leading clients having main offices in Tokyo, Osaka

and Nagoya. Regional clients are served by Dentsus regional subsidiaries, Ad Dentsu Osaka and DentsuMeitetsu Communications. Joint ventures set up by Dentsu and overseas advertising companies mainlyserve international clients. This segment also includes planning boutiques that specialize in creativeservices and advertising businesses for the pharmaceutical and fashion industries.

Beijing Dentsu AdvertisingBeijing Oriental Rihai AdvertisingDentsu Hong Kong

Dentsu TOP&c. Inc. (Internet advertising company)

Phoenix Communications(Republic of Korea)

Dentsu Innovak (Republic of Korea)

Media Palette(Media agency in Taiwan)Dentsu (Taiwan)Dentsu Kuohua (Taiwan)

Branding Services

Spotlighting Beijing Dentsu Advertising, Dentsu has enhanced its ability to participate successfully inthe Chinese media business and other domains with services flavored by a uniquely Dentsu style.Business, especially with Japanese global clients, has grown. We will actively pursue measures,including alliances with and investment in local specialized service providers, to build a wider clientbase in China and extend the edges of the advertising perimeter.

China

Media Services

Major regional subsidiaries Dentsu East Japan Dentsu West Japan Dentsu Kyushu Dentsu Hokkaido Dentsu Okinawa Ad Dentsu Osaka Dentsu Meitetsu CommunicationsJoint ventures with foreign-owned companies Dentsu Young & Rubicam Beacon CommunicationsOther advertising companies Frontage Ad Gear

Dentsu provides comprehensive media buying and planning services. In addition, Cyber Communications

and other companies serve as media representatives for Internet and mobile advertising.

Asia

In Asiathe overseas segment where Dentsu has established the deepest connections, in terms ofhistory and traditionsthe Company has worked to expand business, with an emphasis on Japaneseglobal clients. We have almost completed the two-brand media marketing network to serve competingclients in the same industries. Our next objective is to capture more local clients and to selectivelyreinforce services in the digital domain by enhancing the capacity of the overall network.

Dentsu

Planning BoutiquesOne Sky Build Creativehaus Bless YouShingata Shingata Azabu Shingata SokenRewind Drill Dof Nakahata Dentsu Creative ForceWatson-Crick

Specialized AdvertisingDentsu Sudler & Hennessey The GoalMedia Shakers OOH Media Solution

Internet AdvertisingCyber Communications Criteria CommunicationsDA search & link OPT D2 communications

Note: Major subsidiaries in addition to those listed above include CDP UK Advertising, Almeida, Dentsu Business Development Europe and Dixos. Principal affiliated companies include Mediahead Communications.

03

TotalAdvertisingServices

Overseas

Markets Dentsu Asia

(Singapore, regional headquarters)Dentsu Singapore

Dentsu (Thailand)Dentsu Plus (Thailand)Dentsu (Malaysia)Dentsu Utama (Malaysia)Dentsu VietnamDentsu Alpha (Vietnam)Dentsu IndonesiaDentsu PhilippinesDentsu Indio (Philippines)Dentsu Media (Media agency in Thailand)TUP-NA (Event production company in Thailand)Football Media Services

(Sports marketing company in Singapore)


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Marketing Services Content Business

Dent su of fers ex pert solutions to the challeng es that our clients face. The Dent su Group is expanding its involvement in content marketing.

Dentsu directly handles business related to video products and sports marketing. In addition, the companieslisted below are developing their highly specialized content businesses in video, audio and other areas.

India, Middle East Europe and the Americas

India presents considerable growth potential. Here, under the leadership of local management, includingexpertise provided by partner companies, we will maximize our three marketing hubs to expand business withJapanese global clients and non-Japanese clients. We will strive to sharpen our competitive edge byresourcefully applying knowledge acquired in Japan to the local digital and mobile advertising markets.

In the United States, Dentsu has emphasized services for Japanese global companies. Under the leadership ofU.S. management, Dentsu will use the acquisition of ATTIK Inc. and mcgarrybowen in the United States toattract business from local blue-chip companies and expand accounts from clients outside the United States.In Europe, Dentsu will encourage management to team up with colleagues across the Atlantic to delivercoordinated services with characteristic Dentsu appeal.

Dentsu Tec Dentsu ResearchDentsu Public Relations Wunderman DentsuDentsu Table Media CommunicationsDentsu e-marketing One Video ResearchDentsu Casting and EntertainmentDrum Dentsu Direct ForceISIDDentsu RazorfishIn-Store Communications

Dentsu Music and EntertainmentCreative AssociatesDentsu Sports Partners

Dentsu Marcom (India)Dentsu Communications (India)Dentsu Creative Impact

Lastminute Media (A Web site operating compa ny for the sale of advertising spots)Clickstreamers India (An Internet advertising company in India)ClozR Customer Communications (A CRM solutions company in Indi a)

Dentsu Holdings USA (Holding company)Dentsu America (USA)McGarry Bowen (USA)

Dentsu Sports America (USA, services related to international sports marketing)Dentsu CanadaDentsu Latin America Propaganda (Brazil)Dentsu ArgentinaDentsu UK Sharp Image Creative Services (Production company in the Un ited Kingdom)Dentsu Sports Europe (the United Kingdom, services related to international sports marketing)Dentsu Brussels Group (Belgium)Dentsu Production Concepts (Production company in Belgium)Cayenne Werbeagentur (Germany) Indigo Werbeagentur (Germany)DCTP Entwicklungsgesellschaft fr TV-Programm (Program production company in Germany)All About Livecom (Event promotion company in Germany)Cayenne Werbeagentur Wien (Austria) Cayenne (Italy)MATCH Hospitality (FIFA World Cup TM hospitality services company in Switzerland)

(As of Octob er 1, 2009)

04


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Other Countries 31.8%

Japan 9.1%

United States 34.7%

Germany 5.6%

Russia 2.2%Brazil 2.3%

Italy 2.6%France 3.0%

China 4.1%United Kingdom 4.6%

Dentsu holds the top share of the Japanese advertising market, which constitutes 9.1% of the world total. The A pril 2009 edition of Advertising Ageranked the Dentsu

Group the worlds fifth largest entity in the advertising communications industry in terms of 2008 gross profit.

Dentsu holds a leading share of all mass media. This media strength creates a robust platform that underpins Dentsus leading position in the Japanese advertising market.

05

(Percentage of sales: non-consolidated advertising sales for each company total Japanese advertising expenditure)

Share of Principal Mass Media3

(2008)

Japanese Advertising Expenditure, by Percentage of Sales2

(2008)

Relative Scale of Advertising Markets,

by Principal Media1

(2008)

(%)

0

10

20

30

40

50

Dentsu HDY Asatsu-DK

2005

5.6%

22.8%

14.0%

2006

5.5%

23.2%

13.6%

2007

5.5%

22.6%

13.6%

2008

5.4%

22.4%

14.0%

Dentsu Hakuhodo Daiko Advertising Yomiuri Advertising Asatsu-DK Others

(Billions of yen)

0

500

1,000

1,500

2,000

Television Newspapers Magazines Radio

14.4%

1,909.2

407.8

154.9

15.8%

37.3%

19.4%

827.6

1 : Advertising media includes television, newspapers, magazines, radio, movies, outdoor and Internet.

Source: Prepared by Dentsu, based on ZenithOptimedias World Advertising Expenditure Forecasts, July 2009 edition

2 : (1) HDY refers to the simple total of non-consolidated net sales of Hakuhodo, Daiko Advertising and Yomiuri Advertising. (2) In some instances, the scope used in calculating net sales figures for individual companies differs from that used in

Advertising Expenditures in Japan. Percentage figures refer to comparisons given in Advertising Expenditures in Japan.

Sources: Current Situation of Japanese Advertising Agencies, Advertising and Economy, Advertising Expenditures in Japan.

3 : (1) Non-consolidated figures for calendar year 2008. (2) In some instances, the scope used in calculating net sales figures for individual companies differs from that used in Advertising Expenditures in Japan. Percentage figures refer to

comparisons given in Advertising Expenditures in Japan.

Sources: Individual net sales figures are from Advertising and Economy. The denominator for this calculation is from the 2008 edition of Advertising Expenditures in Japan.


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Hakuhodo 15%

ADK 5%

Dentsu 40%Others 40%

Standard & Poors (S&P) AA- A-1+

Rating & Investment Information (R&I) AA a-1+

Dentsu has a strong financial base, currently holding the highest Standard &

Poors ranking of any advertising agency in the world.

By industry, the information/communications, beverages/cigarettes and

cosmetics/toiletries sectors constitute a high percentage of net sales. Dentsus

diverse client portfolio ensures a stable profit base.

Starting with the mass media business, Dentsu offers a diverse range of services,

spanning marketing / promotion, creative, spor ts and other conten t businesses.

Dentsus abundant creativity and carefully constructed organizational strengths, as well as its powers of expression and persuasion, are widely regarded in Japan and overseas.

06

6 : Source: THE GUNN REPORT AND SHOWREEL OF THE YEAR 2008

Net Sales by Industry7

(Fiscal Year Ended March 31, 2009)

Net Sales by Business Category8

(Fiscal Year Ended March 31, 2009)

7 : Non-consolidated figures for the fiscal year ended March 31, 2009 8 : Non-consolidated figures for the fiscal year ended March 31, 2009

Overseas Ratings

Gunn Reports Most Awarded Agency Rankings6

(1999 2008)

Ratings in Japan

Comparison of TV CM awards4 received at

the 2008 ACC CM Festival5

4 : Sponsored by the All Japan Radio & Television Commercial Confederation (ACC), established in 1961.

This festival is regarded as the most authoritative contest in Japan for commercials.

5 : Source: Prepared by Dentsu, based on Advertising and Economy, October 2008 edition.

Advertising Agency

DDB (London)

Dentsu

Crispin Porter & Bogusky (Miami)

Abbott Mead Vickers.BBDO (London)

AlmapBBDO (Sao Paulo)

Wieden & Kennedy (Portland, OR & N York)

TBWA \ Paris (Paris)TBWA \ Chiat \ Day (USA)

Bartle Bogle Hegarty (London)

Lowe (London)

Ranking

1

2

3

4

4

6

78

9

10

Short-TermLong-Term

(As of September 31, 2009)

Others 25.8%

Beverages/Cigarettes 10.0%

Information/Communications 14.8%

Cosmetics/Toiletries 7.3%

Automobiles/Related Products 7.2%

Finance/Insurance 6.9%Foodstuffs 6.1%Home Electric Appliances/AV Equipment 5.9%

Pharmaceuticals/Medical Supplies 5.4%

Distribution/Retailing 5.3%

Hobbies/Sporting Goods 5.2%

Content Services 5.7%

Marketing/Promotion 11.8%

Television Spots 24.2%

Television Time 23.7%

Others 1.9%

Newspapers 10.1%Magazines 4.1%

Radio 1.5%

OOH Media 2.9%

Creative 12.3%

Interactive Media 1.8%


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07

1,910,469

1,592,566

317,902

260,299

57,603

54,929

27,532

14,681

(8,289)

1,006

69,901

1,240,037

491,855

10,110.45

9,931.97

15

18.1

5.7

4.7

39.7

14.8

1,963,296

1,637,400

325,896

267,120

58,776

65,103

31,002

81,058

(31,238)

(42,668)

78,412

1,277,722

521,180

11,300.31

11,159.97

25

18.0

6.1

4.7

40.8

22.1

2,093,976

1,745,584

348,391

285,556

62,834

60,712

30,688

41,962

(52,003)

(9,779)

62,015

1,268,049

554,760

11,193.17

10,878.56

30

18.0

5.7

4.9

43.7

26.8

2,057,554

1,712,332

345,222

289,095

56,126

63,610

36,246

56,007

(18,069)

(30,701)

70,252

1,251,912

567,293

13,202.77

12,804.73

35

16.3

6.5

4.5

45.3

26.5

$19,211,753

16,010,343

3,201,410

2,761,784

439,625

(50,620)

(208,217)

431,225

(226,650)

(282,485)

583,030

$11,122,303

4,607,228

$ (0.81)

0.36

1,887,170

1,572,696

314,474

271,290

43,184

(4,972)

(20,453)

42,359

(22,263)

(27,748)

57,271

1,092,543

452,568

(79.61)

35

13.7

(4.0)

3.7

41.4

Notes: (1)U.S. dol la r amounts have been translated from yen at the rate of 98.23 = US$1, the approximate exchange rate preva i l ing on the Tokyo Foreign Exchange Market on March 31, 2009. (2)Di luted net income per share for the

fisca l year ended March 31, 2009, is not recorded because the Dentsu Group recorded a net loss per share. (3)Based on the number of shares outstanding after the stock sp l i t implemented in January 2009. (4)Operating margin =

operating income gross profi t 100 (5)ROE = net income ( loss) average tota l shareholders equity based on tota l shareholders equity at the beginning and end of the f isca l year 100 (6)ROA = operating income average

total assets based on total assets at the beginning and end of the fiscal year 100 (7)Equity ratio = total shareholders equity total assets 100 (8)Dividend payout ratio = cash dividend per share consolidated net income per share 100

For the year:Net sales

Cost of sales

Gross profit

Selling, general and

administrative expenses

Operating income

Income (loss) before income taxes

and minority interests

Net income (loss)

Net cash provided by (used in)

operating activities

Net cash provided by (used in)investing activities

Net cash provided by (used in)

financing activities

Cash and cash equivalents, end of year

At year-end:

Total assets

Total shareholders equity

Per share data (yen/dollar):

Net income

Basic Diluted(2)Cash dividends

(3)

Ratios (%):

Operating margin(4)

Return on equity (ROE)(5)

Return on assets (ROA)(6)

Equity ratio(7)

Dividend payout ratio(8)

2005 2006 2007 2008

Millions of yenexcept per share data

2009

Thousands of U.S. dollars(1)

except per share data2009

Dentsu Inc. andConsolidated SubsidiariesYears Ended March 31


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Gross Profit

20090

200

300

400

500

100

0

20

40

60

80

2009

Net Sales

0

500

1,000

1,500

2,000

2,500

2009

0

300

600

900

1,200

(%)

0

2

4

6

8

1,500 10

2009

Total Assets, Return on Assets (ROA)

(%)

Total Shareholders Equity, Equity Ratio

0

12

24

36

48

20090

120

240

360

480

60600

(%)

0

4

8

2009

0

20

40

-8

-4

-40

-20

2005 2006 2007 2008 2005 2006 2007 2008

2005 2006 2007 2008 2005 2006 2007 2008

(%)

10

15

20

0

5

2005 2006 2007 2008 2005 2006 2007 2008

(Years Ended March 31)

08

(Billions of yen)

(Billions of yen)

(Billions of yen)

(Billions of yen)

(Billions of yen)

(Billions of yen)Operating Income, Operating Margin

O pe ra ti ng i nc om e O pe ra ti ng m ar gi n

Net Income (Loss), Return on Equity (ROE)

Total assets Return on assets (ROA) Total shareholders equity Equity ratio

N et in co me ( lo ss ) R et ur n o n e qu it y (R OE )


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The advertising industry has entered a new era, and the Dentsu Group has

embraced this as an opportunit y to reestablish itself. Presiden t and CEO Tatsuyoshi

Takashima discusses the Groups performance and business direction in the

following interview.

Q: Please summar ize the G roups results for fiscal 2008, ended March 31, 2009.

A: Economic conditions in Japan during fiscal 2008 suffered from the rapid

worsening of the global economy in late 2008, which was triggered by the

financial crisis in the United States resulting in further serious conditions in

both the corporate and household sectors.

For the advertising industry, the operating environment remained extremely

difficult and was characterized by unprecedented challenges.

Amid these unfavorable circumstances, the Dentsu Group worked

aggressively to develop its business activities, drawing on the strengths of eachcompany under its umbrella to turn opportunities provided by major events,

particularly the Beijing 2008 Olympic Games, into avenues for growth.

However, our concerted efforts did not produce the desired results for fiscal

2008. On a consolidated basis, net sales retreated 8.3%, to 1,887,170 million.

Gross profit dropped 8.9%, to 314,474 million. Operating income tumbled

23.1%, to 43,184 million. The Groups results were also affected by the

booking of a valuation loss on investment securities of 51,116 million as an

impairment loss. In the end, the Group succumbed to a net loss of 20,453

million, a significant rever sal from 36,246 million in net income in fiscal 2007.

Q: What are the issues that the Group must address on the road to growth?

A: The marketing needs of corporate clients in the advertising industry have

become increasingly sophisticated and complex. Naturally, advertising

companies are expected to provide solutions that properly address these needs.

The Dentsu Groups strength is found in its ability to deliver solutions that

integrate consulting capabilities which help clients to resolve management

and business issuesand a broad range of specialized communication

services, covering everything from planning to implementation. We seek to

maximize this strength and thereby reinforce our position as an enterprising

provider of solutions, designing and executing clear-cut approaches to the

issues our clients have to contend with.

To this end, we will strategically channel our energy into the three areas of

solutions, digital and global, to sharpen our competitive edge and facilitate

quick responses to the rapid transformation of our operating environment.

09


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Tatsuyoshi Takashima

President & CEO

Q: How does the Groups new corporate philosophy promote growth?

A : In January 2009, the Group embraced a new corporate philosophy Good

Innovation. This philosophy embodies our determination to be an active

participant in building a better future for society as a whole because, given the

dramatic change in our operating landscape and the expanding and evolving

scope of our business activities, simple technological innovation is no longer

sufficient. We must bring about new value through innovative ideas and be a

business group that can help create a brighter, happier future for society.

Our actions are always guided by thoughts of how we can contribute to

society. With the trust and high regard of all stakeholders, from shareholders

to consumers, we will strive to fulfill our responsibility as a member of society

and as a group seeking to maximize corporate value.

Q: What are the targets of Dentsu Innovation 2013, the new medium-termmanagement plan?

A: We are aiming for a consolidated operating income of 70 billion, an operating

margin of 20% or higher, and return on equity of 8%, by fiscal 2013, ending

March 31, 2014.

We are unlikely to see major growth in Japans advertising market as we

move forward. Given this grim prognosis, we will strive to achieve business

targets by embracing a new profit structure, work patterns and business model

and by fostering a new awareness among all employees under the Group

umbrella with respect to client solutions.

Q: And what is the outlook for business performance in fiscal 2009?

A: Several big events in fiscal 2009, ending March 31, 2010, include the 12th

IAAF World Championships in Athletics, berlin 2009TM, and Japans 45th

general election for members of the House of Representatives. Despite the

potential for increased advertising that usually accompanies such

headline-making events, the harsh operating environment will probably put a

damper on spending.

This will almost certainly hurt our business results. We anticipate a 14.7%

drop in consolidated net sales, to 1,610.6 billion. Operating income could

tumble 55.1%, to 19.4 billion. Nevertheless, we expect our bottom line to

return to the bl ack, with a net income o f 16.4 billion, compared with the fi scal

2008 net loss of 20.4 billion.

Consolidated earnings forecast is based on November 6, 2009 estimates.

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Internetcompanies

Distributioncompanies

Platform

Platform

Platform

Media companiesSpecialized companies

Contentproviders

Others

Telecommunicationscompanies

Mediacompanies

Collaboration

11

A New Platform in a Changing Business Environment

Evolving communication technology is having a significant impact on the

advertising industry, influencing the behavior of consumers in the way they

interact with media and transforming the media environment as well as the

industrys rules of competition.

In Japan, the birthrate continues to fall, the percentage of seniors in the

population continues to rise, and markets are maturing. These conditions have

caused diversification in demand, and since mass-marketing assumes mass

production and mass consumption, solutions emphasizing mass media alone are

no longer sufficient to capture consumer interest.

Our clients are also faced with an operating environment that has changedsignificantly. Competition among domestic and international companies has

intensified, as markets in developed countries mature and markets in emerging

countries acquire a higher profile in the world economy. As a result, our clients

are keen to realize a better return-on-investment for their marketing efforts,

causing budgets to shift away from mass media advertising in favor of

promotional activities.

These consumer and client issues are reshaping the advertising industry, with

major repercussions for the Dentsu Group. One of the biggest catalysts for

change is digital technology, which has enabled various groups, particularly

consumers, companies and media, to engage each other directly to share

information, execute transactions, and buy and sell productsall on a new

platform where this activity is simultaneously recorded.

Communications and information delivery are not what they used to be. We

have entered a new platform era.


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Quality solutions for clients

New business model forthe new platform

Resultingcompetitiveness

12

The Dentsu Groups Strategic Edge in the New Platform Era

Dentsu will cross the strengths it has already cultivatedits knowledge, or

insight, and its ideas, or creativitywith broad and detailed consumer

information and new information channels which Dentsu will establish and

acquire through cooperation with key players in the platform era. This

invigorated position will enable us to provide clients with high-quality solutions

and will underpin a new business model that reinforces our ability to capitalize

on business opportunities in the new platform era.

Sharpening the Groups Competitive Edge

We will expand the scope of problem identification and solutions for clients and

present media-neutral, solution-neutral approaches that do not depend solely

on mass media.

We will define a new business model based on the new platform, covering arange from content development and distribution to settlement and

promotional activities and further to media.

Achieving Increased Competitiveness

The most essential element of an enhanced level of competitive excellence in the

new platform era is for the Group to promote development in the three key areas

described below while encouraging a close connection between respective

initiatives.

1) Planning tools and methods to maximize t he Groups intrinsic strengt hs,

namely knowledge and ideas

2) Focusing on the media content business, which is vital to our abilit y to

understand consumer trends, while devising new communication methods and

information distribution channels

3) Developing technologies to support next-generation mechanisms for

information distribution, database marketing and the new business model

To realize this vision, management drafted a medium-term management plan,Dentsu Innovation 2013, which will guide the Group from fiscal 2009 through

fiscal 2013, the five-year period from April 1, 2009 through March 31, 2014.


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13

Dentsu Innovation 2013

Management Vision

Medium- to long-term goals, based on the Group philosophy Good Innovation.

Statement: In the new platform era, we will strive to be a business group that

constantly pursues innovation in client services, with media companies, for

consumers, and also for ourselves, while delivering greater value to society at large.

Slogan: Taking on the New Platform Era

Five Areas in which Innovation Will Turn Vision into Reality: Dentsu Innovation

2013 is a road map highlighting five areas for innovation in the new plat form er a.

Measures will be promoted to facilitate concrete activities in these five areasand successfully overcome challenges in the new platform era.

1)Services Innovation

Continue to strengthen client relationships and restructure media businesses

Enhance our capacity to deliver solutions that identify and resolve client

concerns over a wider scope

Build diverse remuneration and profit-capturing structures that translate

added value into profits

Redefine the service structure to meet the diverse needs of clients, primarily

by reinforcing implementation approaches in the digital and promotional activity

domains and by honing a sharper competitive edge in our media businesses

2) Business Model Innovation

Secure a position that facilitates the provision of value-added services in the

new platform era

Strengthen our collaboration with key players on the platform to build an

environment that allows us to acquire a better grasp of actual consumer

preferences knowledge that is indispensable in resolving client concerns

Develop a new media business model and pursue new activities to enhance

profitability

3) Global Business Innovation

Reinforce competitiveness from a new perspective unconstrained by

conventional concepts

Expand our portf olio of marketing and other services to include mergers

and acquisitions and thereby transform the agency network into a force

strong enough to compete with rivals in local markets Promote management reforms, emphasizing the establishment of an

optimum management structure in each geographic area, greater flexibility

through the delegation of authority, and thorough profit control

4) Human Resources Innovation

Overhaul human resources and personnel development programs to secure the

people needed to provide services in the new platform era and to establish the

appropriate structure to support essential personnel

Shift to a merit-based pay system that reflects employee skills and

contribution to corporate improvements

Institute diversified career paths and work styles, while enhancing education

and training programs


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14

Business Targets

Consolidated operating income: 70 billion

Operating margin: 20% or higher

ROE: 8%

5) Cost Innovation

Implement a cost structure that covers the whole Dentsu Group

Translate added value into profit, and establish a mechanism for deeper cost

reductions

Seek streamlined, more change-resilient back office operations

Review the roles and functions of Group companies and realign where

necessary

The future is unlikely to bring major growth in Japans advertising market. Against

this challenging backdrop, we will strive to reach business targets by embracing a

new profit structure, work patterns and business model and promote a new

awareness among all employees under the Group umbrella.


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15

Creating New Value in the Platform Era

Whether you say above the line and below the line or four traditional mass

media and non-mass media, conventional media classifications are being

rendered obsolete. Advertisers seek creative insightinspiration for the

essential components of true solutions that go beyond the confines of traditional

media category labels.

The advent of digital technology and its widespread use have significantly

altered the relationship between consumers and companies and how each

segment deals with media. Communication is now direct, crossing previously

demarcated media borders and prompting the emergence of new communities

with considerable market influence.

As symbolized by the ubiquitous realm of the World Wide Web, the position

that used to be the receiver of information in two-way communication has

become the sender and vice versa. A new era has dawnedthe platformeraand no one, not clients, consumers or the media, is bound by

communication stereotypes anymore.

The Dentsu Group was quick to embrace media neutrality, a concept that

facilitates the application of flexible creative expression, primarily solutions, in

the platform era. We pinpoint client issues and consumer behavior and combine

various interactive media with the four traditional mass media to move speedily

toward a single goal.

Comprehensive communication, with cross-media at the core, is exactly the

way to deliver optimum solutions in this new era.

Underpinned by Solid Media-Built Relationships

Media neutrality calls for flexibility in media planning to realize solutions that

transcend a specific media format. It is an effective approach to successful

communication in this complex platform era.

Despite the obvious merits of integrated communication, the shift to media

neutrality is not an easy transition for many advertising agencies. The Dentsu

Group has taken a leadership role on the world stage in putting this concept into

practice and thus embodies the creative insight needed in the new era primarily

because of its strong media development capabilities.

With many years of experience bringing advertisers and media together,Dentsu has developed close ties with all the major media companies. The

connection to television broadcasters is particularly tight, through

participation providing financial and human resources in the establishment

of major commercial broadcasters and support for marketing activities and

program production.

The Group also enjoys a long-standing relationship with members of the

newspaper community. This connection goes back to Dentsus roots and the

1901 establishment of its predecessor, Telegraphic Service Co., which provided

services integrating advertising and communications. As a result, the Group has a

competitive edge in securing advertising time and/or space for its clients.

We have reinforced our relationships with media companies by introducing

advertisers to them and by planning and then proposing programs andmagazines to broadcasters and publishers, respectively, that appeal to

consumers as well as advertisers. The history we have built with media

companies gives us an overwhelming advantage in negotiating for advertising

time and/or space.

Many mega advertising agencies overseas have grown by emphasizing

acquisitions and provide a varied array of services through individual affiliated

companies. In comparison, Dentsu has expanded its market presence under the

Group banner and cultivated new business domains with innovative ideas from

within the Group to provide a broad range of services as an integrated organization.

For creative minds, media is omnipresent, with the capacity to reshape ideas

for specific purposes. To us, media is not merely space for advertisements but a

vital communication tool that enables consumers and advertisers to achieve

innovation.

Being able to utilize media as a communication tool in a media-neutral

environment is our greatest strength.

Special Feature 1:Creative Interview

Creative Ideasfor Innovation


17/94

16

Creativity for Core Ideas

Progress in digital technology is blurring the hierarchy that once determined the

flow of communication, from clients to ad agencies and then from ad agencies to

consumers. In addition, attitudes about information-sharing are diversifying.

These are the characteristics of the platform era. The times call for a

cross-media approach to communication, but what is the secret ingredient for

success? I believe it is the creation of core ideas.

A core idea forms the heart of an ad campaign. It accentuates the advertiser

specifically and succinctly or spotlights a product, its originality and its strengths.

It provides answers to the questions: What do we say? How do we say it?

The approach used to get a message across to the target group is different,

depending on the media channel. The rhetoric of a newspaper ad is not at all the

same as a mobile ad, nor should it be. As media choices increase and techniques

become more complicated, core ideas take on greater importance. A powerful coreidea is the starting point of communication over any and all media channels.

Having that key component is imperative for successful cross-media communication.

New core ideas can come from anyone in-housepeople in creativedepartments, people in marketing, people in sales or people who deal with

media accounts. Teams take flashes of inspiration and clues for new business

models from individuals and turn these seeds of insight into core ideas. An open

atmosphere permeates the Groups creative activities and facilitates the use of

employees knowledge, impressions and experience in cultivating marketable

ideas, regardless of section or status. Essentially, the corporate environment

encourages everyone to demonstrate creativity.

This is not a recent development. Dentsu has always emphasized core ideas.

You might say creativity is the heart and soul of our corporate culture.

Dentsus Potential in the G lobal Market

The Cannes Lions International Advertising Festival is the venue for the worlds

most prestigious advertising awards. At the 2009 event, Dentsu was honored as

Media Agency of the Year. Members of the Dentsu Group took home five golds,

two silvers and four bronzes.

I participated in this advertising festival as jury president of the outdoor

media category. The experience emphasized to me how progressive the Dentsu

Group really is as a driving force in the media-neutral movement. It happened to

be at Cannes, but could apply to any international advertising awards. What I

saw first hand made me realize that the concept of creative expression had

reached a turning point on a global scale.

The quality of expression in media used to be in the spotlight. However, these

days the focus is shifting to an assessment of how a solution is provided.

Copywriting and art direction, as stand-alone efforts, are less noteworthy, while

the trend to measure the quality of comprehensive solutions is gaining strength.

Many mega advertising agencies abroad have not effected a smooth

transition to media neutrality because their basic policy has been to outsource ad

campaign planning to specialized companies. The Dentsu Group, however,

created several advertising formats on its own, went through the process ofputting them into practice and ensuring their reliability, and developed them into

viable advertising techniques.

For the Group, media neutrality isnt a new concept in creative services; its a

long-running, deeply etched, intrinsic part of our corporate genetic code.

Solutions built on media neutrality are sure to be as cutting edge in the global

market as they are in Japan. Worldwide expectations are rising. Demand for

media neutral solutions is growing. Its so close I can touch it.

Valuecreated by the Dentsu Group in providing information to consumersover various media channelsmeans responding to client needs at an

increasingly higher level while contributing to a brighter, happier future for society.

Platform era or not, the underlying concept of value at Dentsu wont change.

Shaping ground-breaking business models with all available media is a

powerful incentive for creative minds. This is the most important responsibility

we have to fulfill in the platform era.


18/94

Concept: Paradigm Change

Interactive communication in the new era hinges on YouTube

New Approach Outside Preexisting Framework

On November 20, 2008, Toyota Motor Corporation launched sales of the iQ, a

premium ultracompact car that shatters automaking stereotypes. The iQ

articulates a complete change in lifestyle and a fresh sense of values for drivers,

and the creative minds at Dentsu felt it was deserving of an innovative and

inspiring breakthrough ad campaign.

In planning the ad campaign, we devised and ran with an idea that cleverly

utilized YouTube and its unique potential to match user segment with target

market. We came up with an unprecedented mechanism for interactive

communication and successfully spurred interest in the iQ and a deeper

appreciation of Toyotas forward-thinking ingenuity.

Cross-Media Communication: What this Era Needs

Progress in media-applied technology has given consumers many ways to deal

with media. The value of media is different for every individual and, increasingly,

consumers are putting up what we call information barriers to prevent being

inundated with information they see as unnecessary to their own circumstances.

For the iQ campaign, we visualized a new communication format perfectly

attuned to this new era and gave it shapecross-media communication.

We define cross-media communication as creating scenarios that move

target consumers beyond their information barriers. It is different from the

conventional media mix perspective, which focuses on the types of media

distribution that ensure a message reaches its intended target.

The very best scenarios combine core ideas and scenario ideas, with the core idea

being the heart of a campaignthe vital nucleus of the planning processand

the scenario idea being the framework used to realize the core idea.

First, we design a core, which will function like an engine to move the target.

Then we add in multiple contact points, which connect the consumer to the

brand, and link these points to the core with moving communication. Core ideas

and scenario ideas are a unitimagine them as two sides of the same

coinand together, they make it possible to capture consumer interest and

draw individuals out from their isolating information barriers.

Utilizing New Platform YouTube

In the iQ campaign, we pursued a revolutionary cross-media strategy under the

concept of paradigm change.

In the pre-launch campaign, we worked with Toyota to promote the iQ

through Web-based ads, beginning in August 2008, three months before sales of

the car began. Then in October 2008, we drew attention to the car through

original OOH media and used a public channel, dubbed New Way iQ, on

YouTubethe video-sharing siteto create some market buzz with a series

of promotional movies entitled Amazing Films that played to the iQs

drivability. Toyotas co-sponsorship of live events and a fashion-inspired art showprovided additional opportunities to raise the iQs profile among the

information-savvy target consumer group.

In the launch campaign, the Amazing Films series delivered previously

through YouTube were linked to television commercials and Web-based ads.

On launch day, Toyota announced with great fanfare that the iQ had quite

literally driven away with the Japan Car of the Year 2008 2009 award.

Advertisements running across 15 columns were placed in domestic newspapers

with national circulation to draw out latent demand.

A special Web site was set up to promote greater appreciation of the iQs

features, and in February 2009 the site began producing some side benefits

through the addition of uniquely conceived features. One is a page aimed at

creating a fan base, where users can upload original, iQ-themed videos that

allow other users to see how great the car is to drive.

Cutting-Edge Cross-Media Strategy Captures Top Results and

High Acclaim

As of Decembe r 31, 2008, the movies on the YouTube iQ channel had been vi ewed

more than one million times. The use of a video-sharing site to create some iQ

17

Special Feature 2:

Dentsu-style cross-media

communication planning



19/94

buzz was a breakthrough sales strategy that worked like a charmorders during

the month between announcement and the start of sales far exceeded initial goals.

Amid diversification of contact points connecting consumers to brands, the iQ

campaign marked a milestone, delivering Toyotas message to a large segment of

its target market and successfully capturing that segments interest.

This campaign is proof that Dentsu is definitely on the right track with its

cross-media communication emphasis.

18

Structure and Components of Paradigm Change Campaign

Pre-launch (August 19 November 19, 2008): Distribute movies on YouTube and create a buzz with original approaches to OOH advertising

OOH: Draw attention with unconventional approachesto advertising

Ginza Sony Building

YouTube: Create a b uzz

iQ Channel

Event Co-Sponsorship: Raise iQs profile

Live event Art exhibition

Invited 2,000 YouTube users to a live event

for which Toyota was the main sponsor

Attracted the attention of passers-by with a vertical installation on the side of the

Ginza Sony Building in Tokyo, and a performance by dancers suspended in mid-air

Delivered streaming video of the truly off-the-wall dance performance at the Ginza

Sony Building to complement a series of promotional movies entitled Amazing

Films, which emphasizes the iQs drivability

Showcased new-concept value through

innovative two-brand collaboration, spotlighting

the Somarta fashion brand and Toyotas iQ

Web-based adslinked to iQ Amazing Films

Amazing Films streaming online

Participatory content

New Way iQ World iQ Visual Mix Contest

Product Ads: Elicit demand

Television commercialslinked to iQ Amazing Films

Launch (November 20, 2008): Interactive communication format l inking YouTube and special site to cultivate a fan base

YouTube: Create a fan base

Linked the Amazing Films series delivered previously through YouTube to

television commercials and Web-based ads. Highlighted great drivability through

a unique presentation showing two iQs parking in a typical one-car space.

Used rich content, including flash movies,

to underline the iQs five most appealing

aspects: design, innovation, safety,

performance and ecology

Special Web site: Spur interest and promote understanding

Fans generate original iQ-themed videos and post them on YouTube

as part of a contest in which users vote for their favorite production.

The winner receives an iQ.

iQ Amazing Films


20/94

Movie relay featuring 1,000 men and womeneach expressing

a unique fashion stylethat links to Google Maps so viewers

can visit representative districts of Tokyo

Telling the World about Real Fashion in Tokyo

In spring 2009, UNIQLO CO., LTD., launched a line of hoodies, referred to as

parkas in Japan, in various colors and materials. Dentsu timed a campaign

UNIQLO Parka Style 1000to coincide with the product announcement and

introduced 1,000 different ways of wearing the colorful parkas.

Dentsus tasks were manycreating a campaign that would convey thedepth of this product line and highlighting the vast possibilities for coordinating a

specific look, while spurring interest not only throughout Japan but also overseas.

In this campaign, Tokyo became the stage to showcase an awesome array of

parka colors, designs and materials and to profile the huge spectrum of fashionchoices in this sprawling metropolis. We hatched the idea for a Tokyo Fashion

Map, which captured the essence of Tokyos many unique districts, from upscale

Yamanote and old-charm Shitamachi to business districts and areas frequented

by young people such as Akihabaras famous electric town, and gave a visual

expression to district-specific fashion trends.

Essentially, UNIQLO was able to present its parkas to domestic and

international consumers in an attractive setting while playing up the fashion

styles that give each district of Tokyo a different atmosphere.

New Conduit for Executing Promotional Activities

The Tokyo Fashion Map was a historical undertaking for several reasons. It

marked the largest coordinated trial campaign using Tokyo as a backdrop. It

generated the largest fashion photo collection ever. And it precipitated the

largest distribution of street Jack, a monthly fashion magazine spotlighting

best-selling clothes.

Tokyo Graffiti, a magazine by Graffiti Magazines that produces exceptional

street snapshots, was also involved in the project, reinforcing the map concept.

To create the Tokyo Fashion Map, the on-the-street crew approached 1,000

men and women and asked them to put on a UNIQLO parka. The resulting 1,000

poses went into a publication TOKYO FASHION MAP with UNIQLOthat went

on sale at bookstores and convenience stores throughout Japan and at UNIQLO

outlets at home and abroad. The photos were also uploaded to UNIQLOs Web

site to create an online fashion map of Tokyo.

The Tokyo Fashion Map site comprises three parts: street snapshots of the1,000 people asked to wear UNIQLO parkas; a parka relay movie, in which parkas

appear to be passed from one district to another; and a map of Tokyo using

Google Maps. The content on this site offers visitors a look into the district-specific

fashion scene because people are seen in the background coming and going along

the streets. It also enables visitors to pinpoint the location of GPS-tagged

snapshots on Google Maps.

Innovative media integration generated new possibilities for advertising ineach genre.

Designing New Media that Utilizes Content

Two objectivescreating inviting content instead of just an advertisement and

extending the reach of media through the power of creative expression underpinned

promotional activities fine-tuned to consumers rather than mass advertising

distanced from consumers.

We captured the publics attention by alternating between Web-based

activities and magazines and promoted communication between districts.

The Tokyo Fashion Map attracted considerable media attention overseas,substantially propelling sales of UNIQLOs parkas year on year. In addition, at

Cannes Lions 2009, the Tokyo Fashion Map scored a Cyber Gold and a Media

Bronze for Dentsu.

This performance-oriented result attests to Dentsus success in expressing

UNIQLOs brand conceptcomponent-wearacross a range of gender and

age groups. The awards show that the Company has earned the high regard of

the global advertising industry for the way it pursued a different kind of

magazine tie-up and related Web development as well as the Tokyo guidebook

function of the campaign.

19

Special Feature 3:

Media Neutral Creativity

Thinking Outside the Box



21/94

The Tokyo Fashion Map

Parka relay moviescreenshots

TOKYO FASHION MAP with UNIQLOmagazine

20


22/94

Advertising Elementary School

A boy arranges notes highlighting his best qualitiesCreating product commercials in the classroom

21

For details on the Dentsu Group Charter of Corporate Conduct and information on

the Groups corporate social responsibility (CSR) activities, please visit

http://www.dentsu.com/csr-env/index.html and browse through our

CSR/Society and the Environment section.

The Dentsu Group sees social responsibility as a duty to willingly address a range

of social issues, including legal compliance, environmental protection, social

contribution, workplace safety and hygiene and the protection of human rights,

from a stakeholder perspective.

To fulfill this duty, in October 2004 we formulated the Dentsu Group Charter

of Corporate Conduct, which serves as a standard within the Group and guides

management and staff in putting CSR activities into routine practice. Most

recently, in April 2009 we established the CSR Committee to promote CSR

initiatives, and through this committee we will work to strengthen our reputationfor corporate reliability, hone a sharper competitive edge and underpin sustainable

development that will help to build a better society and revitalize the economy.

1) Social Contribution Activities:

Using Communication Skills for the Benefit of Society

Activities that contribute to the community fall under Dentsus definition of CSR.

We draw on diverse capabilities and intellectual assets accumulated as a

responsible corporate citizen to support the realization of an enhanced society.

Concurrently, these activities also help to polish the interpersonal skills of

employees and raise the corporate value of Dentsu itself.

Social contribution activities at Dentsu have always emphasized the power of

communications. Making society better through the power of communications

remains the underlying principle of our activities today and encourages employee

participation in various community-oriented events.

Major Activities

Advertising Elementary School Project

Learning how to convey a message by creating television commercials

Advertising Elementary School, a program for elementary school students, is

designed to foster creative thinking, judgment skills, and the ability to express

ideas and solve problems in group situations through the creation of television

commercials for fun. Dentsu and Tokyo Gakugei University launched this program

in 2006, with Dentsu capitalizing on its accumulated experience and know-how

in advertising-oriented communications to develop the teaching materials.

Following practical research at Setagaya Elementary School, which is

affiliated with Tokyo Gakugei University, the program was extended to public

elementary schools in December 2008.

Prior to the expansion of the project, in August 2008 Advertising Elementary

School was recognized with the Chairs Special Award in the corporate social

contribution category at the 2nd Kids Design Awards sponsored by Japans

Ministry of Economy, Trade and Industry.

Corporate Social

Responsibility


23/94

S em in ar to im pr ov e c om mu ni ca ti on sk il ls fo r N POs D en ts u- Ch ina Ad ve rt is ing Ed uc at ion al Ex ch ang e P ro je ct U NE SC O Wo rl d Te ra ko ya Mo ve me nt

Dentsu received a certificate of appreciation from

Chinas Ministry of Education at

the 4th Advertising Education Seminar

Fifth anniversary forum, in March 2009 ECO FIRSTOutside view of a Terakoya school in Cambodia,

pictured in 2006

22

Public Relations Hints for NPOs

Seminar project to acquire keys to better communication

Fine-tuning public relations for success is a common challenge for non-profit

organizations (NPOs) in Japan. Confident that NPOs would benefit from the

communication skills that Dentsu has accumulated as an advertising agency, the

Company teamed up with the Japan NPO Center to hold seminars specifically for

NPOs in cities throughout Japan. The seminars are conducted by Dentsus

creative staff using an easy-to-understand handbook on public relations entitled

Keys to Communicating: 15 Public Relations Hints for NPOs.

Thirty-four seminars have been held over the five years that Dentsu has run

this project since 2004, attracting about 1,600 participants.

Helping China Develop Advertising Expertise

The Dentsu Japan-China Project was launched in 1996 in response to a requestfrom China to help train and develop advertising professionals. In 2005, the

project evolved into the Dentsu-China Advertising Educational Exchange Project.

Under the new scheme, the project has expanded from the original six

universities in Beijing and Shanghai to all universities in China offering an

advertising program. New facets were added to the project, including

opportunities for university instructors to visit Japan for training, visits by

employees to Chinese universities to give lectures, research conducted on

consignment and the publishing of educational materials.

The project has operated for more than 10 years, and it enjoys the high regard

of Chinas Ministry of Education. If fact, the ministry has recognized the project as

an example of successful collaboration between the government and an overseas

corporation, and in 2006, Dentsu became the first Japanese company to receive a

commemorative award for contributions in the fie ld of education.

In September 2009, Dentsu was presented with a certificate of appreciationfor its many years of global social contributions by Chinas Ministry of Education.

UNESCO World Terakoya Movement

The UNESCO World Terakoya Movement, promoted by the National Federation of

UNESCO Associations in Japan since 1989, is a project to provide literacy

education and help create self-supporting communities in Asia. Four Dentsu Group

companiesDentsu, Dentsu Tec Inc., Information Services International-Dentsu,

Ltd., and Cyber Communications, Inc.are involved in public relations activities,

such as exhibitions and workshops, featuring the Kururimpa characters that

appear in picture books illustrated by a former Dentsu employee.

These four Dentsu Group companies are also involved in another UNESCOAssociations in Japan project, undertaken with the Japan Football Association, to

distribute soccer balls to children throughout Asia.

2) Environmental Protection Activities:

Environment Strategy Committee and Acquisition of Eco First MarkTo enrich Groupwide solutions to environmental concerns, Dentsu established

the Environment Strategy Committee in July 2008. Naturally, this committee

chaired by the presidentseeks to reduce the Groups impact on the environment

and carefully tracks the responses taken by Dentsu and Dentsu Group companies to

address various environmental concerns. In addition, the committee actively extends

solutions to business partners and offers ideas to the general public on

environment-related issues typical of the communications business.

Dentsus policy-based approach to environmental issues through the

committee is highly regarded, a status substantiated by it being awarded the

Eco First Mark by Japans Ministry of the Environment in November 2008. Dentsu

is the first advertising agency to be approved under the ministrys Eco First

Program, which requires participants to make environmental commitments,

disclose plans to reach stated goals and provide updates on progress.


24/94

CO2 Emissions (Years ended March 31)

2005 2006 2007 2008 2009

28,338

26,32325,819 25,880

24,253

CO2 (Tons)

20,000

22,500

25,000

27,500

30,000

D en ts u G re en Ev en t G ui de 62n d D en ts u A dv er ti si ng Aw ar ds : E nv ir on me nt al Ad ve rt is in g A wa rd

Winning advertiser: TOSHIBA CORPORATION

Manufacturing light goes out on ordinary incandescent bulbs

23

ISO 14001 Certification

Dentsu maintains the Dentsu Group Eco Programan environment

management systemand acquired ISO 14001 certification for its head office

and all domestic branch offices in May 2005 based on this program. Currently,

the Company has obtained integrated ISO 14001 certification for 58 companies

under the Group umbrella.

Please visit our Web site for details on the Groups environmental policy.

CO2 Reduction

We aggressively embrace measures to reduce carbon dioxide (CO 2) emissions. In

March 2008, Dentsus head office building received the highest possible rating

of AA+ from the Tokyo Metropolitan Government in its interim report on the

Tokyo CO2 Emission Reduction Program. The program requires companies in

Tokyo to make CO2 reduction plans, and the interim report provided an updateon the status of planned measures.

For Dentsu, the goal is to cut CO2 emissions from the head office by 13% by fiscal2009, ending March 31, 2010, relative to t he amount generated in fi scal 2004.

Raising Awareness among Employees, Limiting Environmental Impact

In our efforts to address various environmental issues as a corporate citizen, we

believe that each and every employee must make these issues their own and

learn about them to properly tackle them. To this end, in 2005, we launched an

environmental slogan and poster production campaign to encourage Group

employees and their families to think about environmental problems and how

they can be part of the solutions.

Dentsu supports employees studying to pass a certification test forenvironmental specialists dubbed the Eco Test. This examination is administered

by the Tokyo Chamber of Commerce and Industry and had its first sitting in 2006.

So far, about 200 employees have become qualified environmental specialists.

Routine business activities include the introduction of cloth eco-bags in fiscal

2008, which led to a 32% decrease in paper bags. Meanwhile, our waste

recycling rate soared in fiscal 2008, to 84.7% from 80.5% a year earlier,

because of easier-to-understand rules on how to separate garbage.

Environment-Oriented Social Communications

Fueled by its core operations in the area of communications, Dentsu actively

engages in social communications on environmental themes.

We aim to help Japan reach its emission-reduction target under the Kyoto

Protocol. To this end, in July 2008, we acquired carbon credits for 3,000 tons of

CO2 and now offer carbon offset programs for corporate clients.

In August 2008, we announced the Dentsu Green Event Guide, which details

environment-friendly approaches for event planning and implementation.

In fiscal 2009, we added an environmental advertising category to theDentsu Advertising Awards, an event with one of the longest histories in Japan

and the only annual integrated showcase for advertising. The new category

recognizes superior expression in environment-related corporate advertising.

We also co-sponsor the IAADentsu Global Students Poster Competition

organized by the International Advertising Association (IAA) in cooperation with

the United Nations. By inviting students from all over the world to create posters

on the theme of climate change, we help to foster environmental awareness

among the younger generation.


25/94

Winning entries in the IAADentsu Global Students Poster Competition

World Grand Prix

Entry title: Thermometer Artist: Matias Fernandez Garcia

(Universidad Argentina de la Empresa in Buenos Aires)

Asia/Pacific Region

Entry title: Paper Artist: Yuki Nakamura

(Kanazawa College of Art)

24

4) Work/Life Balance:

Supporting Employees Diverse Work Styles

The Career Design & Work/Life Balance Section in the Human Resources Division

at the head office in Tokyo was established to encourage a productive work/life

balance among employees. Through this section, we promote awareness

initiatives, based on the idea that synergistic effects derived through work and

private life provide the motivational force that drives continuous corporate

development. Essential ly, this means that a rich and rewarding private life expands

the sphere of work opportunities for employees and generates ideas for new value

creation at Dentsu, while challenging work stimulates the mind and promotes

confidence that carries over into a more satisfying private life.

We also support diverse work styles through structures for time off or leaves of

absence for family reasons, primarily childbirth and child-rearing as well as care of

the sick and the elderly, and for volunteer work. For the second time in two years, Dentsu was selected as one of theparticipating companies named by Japans Ministry of Health, Labor and Welfare

for its Work/Life Balance Promotion Project. Encouraged by this recognition, we

will continue to contribute to the realization of a society in which employees can

achieve an effective balance between work and private life.

3) Human Rights Awareness Activities:

Communication Starts with Respect for Human Rights

Subscribing to the belief that communication starts with respect for human

rights, Dentsu established the Educational Committee on Human Rights in 1987

to encourage greater awareness of human rights issues among employees. We

also set up a department specifically to study the correlation between

advertising expression and human rights. These corporate structures are integral

in encouraging employees to view human rights from a socially acceptable

perspective, acquire a deeper understanding of human rights, and incorporate

this knowledge in the execution of routine business tasks.

One of our in-house activities is a human rights poster program. We inviteGroup employees and their families to submit human rights slogans and then

showcase the best ones in our own posters. We instigated this activity more

than 20 years ago, initially as a way to raise awareness of human rights withinthe Group. However, in recent years outside organizations, including local

governments, have asked for these postersdubbed Dentsu Human Rights

Postersto use in human rights awareness campaigns directed at citizens

throughout Japan.

Since 2007, we have pursued a collaborative approach to the production of

human rights posters, with art students providing the visual designs to go with

our own human rights slogans.

Another collaborative activity is our participation in industrywide campaigns

through seminars and other events sponsored by the Japan Advertising Agencies

Association. We also support local educational programs and readily address

requests from the national government, municipalities, corporations and other

groups for representatives to speak at seminars.

Dentsu is keen to make a positive contribution to the social topic of human

rights from a communications perspective.


26/94


27/94

Exemption from Liability

Dentsus Articles of Incorporation stipulate that the Company may release, by

resolution of the Board of Directors of the Company, Directors (including former

Directors) and Corporate Auditors (including former Corporate Auditors) from

liabilities for damages with regard to the damages stipulated in Section 1, Article

423 of the Corporate Law, up to the limit to be calculated after deducting the

minimum liability amount specified by laws and regulations from the amount of

liability for reparation, if the case falls under any of the requirements set forth

by the applicable laws or regulations, so that they can perform fully their

expected roles in the Company.

4. Approval Criteria for Election of Directors

Dentsus Articles of Incorporation stipulate that resolutions for the election of

Directors shall be adopted by a majority vote of the attending shareholders whohold one-third (1/3) or more of the voting rights of shareholders entitled to

exercise voting rights at the General Meeting of Shareholders. They also stipulate

that resolutions for the election of Directors shall not be determined by

cumulative voting.

5. Approval Criteria for Special Resolutions at the General Meeting

of Shareholders

Except for special resolutions covered separately in the Articles of Incorporation, all

other special resolutions described under Section 2, Article 309 of the Corporate Law

that are put before a General Meeting of Shareholders must, in accordance with a

provision set forth in the Companys Articles of Incorporation, be passed with a

number of votes corresponding to more than two-thirds (2/3) of voting rights held

by shareholders in attendance whose combined shareholdings represent no less than

one-third (1/3) of total voting rights held by shareholders with the power to exercise

such rights. Management believes that this reduced quorum for special resolutions

facilitates the execution of a General Meeting of Shareholders.

The Companys corporate governance structure is outlined in the chart below.

6. Status of Internal Control System

The internal control system exists to encourage voluntary control by Directors,

Executive Officers and employees. The system is designed to ensure that the

Company meets its social responsibilities and grows further.

To ensure that Directors, Executive Officers and employees comply with alllaws, regulations and the Articles of Incorporation during the course of their

duties, we have established the Dentsu Group Charter of Corporate Conduct to

define the sphere of common activities. The CSR Committeea vitally

important corporate structureis charged with creating, operating and

improving the internal control system.

26

General Meeting of Shareholders

Appointment Appointment Appointment

Corporate AuditorsOffice

RepresentativeDirectors

Internal AuditDivision

IndependentAuditors

Board of DirectorsCorporate Auditors/

Board ofCorporate Auditors

Executive Officersand

Their Respective Divisions

Conducting ofinternal audits

Conductingof

audits

Conductingof

audits

Appointment/Supervision

Conducting of audits


28/94

Compliance System for Directors, Executive Officers and Employees

Directors and Executive Officers must perform their duties appropriately, in

accordance with rules governing the Board of Directors and the Board of Senior

Managing Directors, as well as rules for Directors and rules for Executive Officers.

If a Director or an Executive Officer discovers a situation that violatesprevailing laws or comes across any other serious compliance-related issue,

details must be reported without delay. A Director shall report to the Board of

Directors, while an Executive Officer shall report to the Board of Directors or the

Board of Senior Managing Directors. Corporate Auditors must also be

immediately advised of the circumstances.

The departments reporting to the CSR Committee create internal policies and

manuals and conduct training to improve and enhance the compliance system for

employees. The Internal Audit Division, which reports directly to the President,

also conducts internal audits. The Company appropriately operates the D-EAR internal reporting andproposal system to prepare for a possible breach of law and deal with other

internal compliance issues.

If Corporate Auditors request opinions on or measures to improve theCompanys compliance system, Directors and Executive Officers respond without

delay and make any necessary improvements.

The Company has established a department to facilitate the termination ofexisting business relationships with organized crime groups and elements

thereof termed antisocial forces in Japan when a link is recognized and

to resolutely refuse any and all future requests. This department functions as the

liaison between the affected in-house section and the relevant authorities to

expedite an appropriate course of action.

Systems to Ensure Efficient Execution of Duties by Directors and

Executive Officers

The Board of Directors meets on a monthly basis so that Directors can perform

their business tasks efficiently. In addition, a meeting of the Board of Senior

Managing Directors is held three times a month to consider important matters of

management policy or strategy, followed by decision-making on actionable tasks.

Separately, important committees whose membership is primarily comprised of

Directors and Executive Officers convene to resolve or deliberate matters within the

scope of authority that has been vested in them. Meetings of the Board of

Directors, the Board of Senior Managing Directors and important committees are

also held as necessary, in addition to regularly scheduled meetings.

Items resolved by the Board of Directors, the Board of Senior ManagingDirectors and important committees are quickly delegated to Managing Directors

from individual Directors or Executive Officers and transmitted to all employees viathe corporate structure, and promptly reflected in the execution of duties. Urgent

items are posted on the internal electronic bulletin system for rapid dissemination.

Storage and Management of Information related to the Execution

of Duties by Directors and Executive Officers

Information concerning the execution of business duties by Directors and Executive

Officers is stored and managed appropriately in accordance with the Companys

documentation management regulations and information management guidelines.

Risk Management System

Every year, Dentsu conducts internal risk surveys to determine those that are

significant and creates a structure to minimize these risks and prevent the

propagation of damages in the event that such risks become reality. We have

established the Risk Management Rules to streamline a Companywide system

and departmental risk management system to prevent risks from happening or

escalating when a risk actually occurs and have created a plan that outlines

specific measures to pre-empt important risks. Responsibility for monitoring the

status of risk management efforts at Dentsu falls primarily on the Internal Control

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Divisions, under the CSR Committee. Efforts are directed toward self-inspection

and approaches to strengthen the risk management system.

Internal Structure to Support the Corporate Auditors and Their

Independent Status

The Corporate Auditors Office functions as support for employees who assist

Auditors in their duties. This ensures independence from the Companys Directors

and Executive Officers.

System of Reporting to Corporate Auditors and Improving Audit

Effectiveness

Policies are in place to define items that Directors and Executive Officers must

report to Corporate Auditors. Directors, Executive Officers and employees must

swiftly report to the Corporate Auditors information that impacts the operationsor the operating performance of the Company. In the event that Corporate

Auditors request reports other than those indicated above, Directors, Executive

Officers and employees are required to provide such reports to the Corporate

Auditors without delay.

To enhance audit effectiveness, the Internal Audit Division and the IndependentAuditors collaborate with each other to handle any such requests made by the

Corporate Auditors.

Internal Control System for the Dentsu Group, including Subsidiaries

Dentsu positions the Dentsu Group Charter of Corporate Conduct as the Groupwide

code of conduct for the Dentsu Group including subsidiaries, and the Group

subsidiaries resolve to adopt the Dentsu Group Charter as their guidelines for

corporate conduct guidelines.

The Company stipulates matters to be improved and operated by itssubsidiaries as the members of the Group, whereas the subsidiaries respectively

set forth necessary rules based on the above matters determined by the Company

and promote the establishment, operation and improvement of their own internal

control systems to ensure proper internal and external transactions.

System to Ensure Appropriateness of Financial Reporting

Through the CSR Committee, Dentsu establishes a system that ensures

appropriateness in financial reporting by the Group. Subsidiaries and departments

involved in business activities perform self-checks through the course of

day-to-day operations to determine if the internal controls applied in the previous

fiscal year functioned properly. The Internal Audit Division monitors the internal

control system from a perspective free of operational bias to assess the

effectiveness of internal controls related to financial reporting.

7. Internal Audits, Audits by Corporate Auditors and Status of

Independent Audits

Internal Audits

The Internal Audit Office, within the Internal Audit Division, undertakes internalaudits with a staff of about 25 employees. Internal audits are conducted in

accordance with an annual auditing plan and target each division within the

Company as well as affiliated companies in Japan and overseas. The Group

Companies Auditors Office, also within the Internal Audit Division, dispatches

Corporate Auditors to principal Group companies.

Audits by Corporate Auditors

In principle, the Board of Corporate Auditors meets once a month to establish

auditing policies and to allocate responsibilities. The five Corporate Auditors,

three of whom are external, audit the execution of duties by Directors and

Executive Officers, based on an auditing plan, and focus primarily on the status

of Groupwide internal controls, compliance and risk management systems. The

Corporate Auditors Office, established to assist Corporate Auditors in their

duties, has a staff of seven.

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Status of Independent Audits

Dentsu has contracted the accounting firm Deloitte Touche Tohmatsu to perform

accounting audits of the Companys books. No special-interest relationships exist

between Dentsu and the accounting firm, or Dentsu and the managing partners

at the accounting firm who undertake accounting audits of the Company.

The names of the certified public accountants that performed accounting

audits during the fiscal year under review, as well as the assistants involved in

the execution of these audits, are listed below.

Assistants involved in the execution of accounting audits: Five certified public

accountants and 13 others

Cooperation on Internal Audits, Audits by Corporate Auditors and

Independent Audits

The Internal Audit Office, Corporate Auditors and Independent Auditors cooperate

with each other. The Board of Corporate Auditors may request reports from the

Independent Auditors and the Internal Audit Office on auditing methods and

results of audits, as appropriate. It is mainly full-time Corporate Auditors who

meet with other Auditors on a regular and individual basis to exchange

information. The Internal Audit Office also exchanges information and reports, as

appropriate, in response to requests from Corporate Auditors or the Board of

Corporate Auditors, and will participate in a separate exchange of information

with the Independent Auditors.

8. Limited Liability Agreements with Outside Directors and Outside

Auditors

Dentsu enters into agreements with its outside Directors and outside Auditors that

limit their liability for compensation under Section 1, Article 423 of the Corporate

Law. The liability amount pursuant to such agreements shall be limited to the

minimum stated by laws and regulations or 10 million, whichever is higher.

9. Relationships with Outside Directors and Outside Auditors

Dentsus executive directory includes outside Directors and outside Auditors. As of

June 26, 2009, two of the Companys 12 Directors and three of the Companys

five Corporate Auditors were appointed from outside the Company.

Any personal, capital or business relationships or other interests that may exist

between the Company and these five individuals is described below. Notwithstanding

this status, all transactions are routine and there is nothing for which the individualscarry a vested interest.

An outside Director, Satoshi Ishikawa, is President of Kyodo News, a major

shareholder of the Company, and is also Representative Director and President of

Kyodo News Co., Ltd. Each of these companies has business transactions with Dentsu.

Outside Director Masahiro Nakata is President of Jiji Press Ltd., a major shareholder

of the Company. A business relationship exists between Dentsu and Jiji P ress.

An outside Auditor, Atsuko Toyama, is the President of the New National Theatre

Foundation. The Foundation has business transactions with Dentsu.

Outside Auditor Osamu Abe was a full-time Corporate Auditor (Outside Auditor) at

Nippon Express Co., Ltd. However, with the expiration of his term of off ice, effective

June 26, 2009, he retired from this position at Nippon Express. A business

relationship exists between Dentsu and this company. As of the publication date of

this annual report, Mr. Abe has no special interest in Dentsu.

Outside Auditor Yasuchika Negoro has no special interest in Dentsu.

None of these outside Directors or outside Auditors has been affiliated with Dentsu

or any of its Group companies.

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Names of Certified Public AccountantsName of Company to which

These Accountants Belong

Designated and engagement partners Deloitte Touche Tohmatsu

Takashi Nagata

Hitoshi Matsumoto

Tsutomu Hirose

Takashi Sedo


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10. Executive Compensation

Total Compensation Paid in Fiscal 2008

Notes: 1. The totals for Directors and Corporate Auditors above include, respectively,

three Directors and three Corporate Auditors (including two outside

Auditors) who retired at the conclusion of the 159th Ordinary General

Meeting of Shareholders on June 27, 2008. Of these executives, oneof the retiring Directors left the position of Director but assumed a

position as Corporate Auditor, and compensation applied to this person

as a Director and as a Corporate Auditor is included in respective

amounts for Directors and Corporate Auditors in the table above.

Because this executive is essentially counted twice, once under the

Director column and again under the Corporate Auditor column, the

total number of executives at the end of March 2009 is one less than

the simple addition of the component columns.

2. Fixed monthly compensation for Directors and Corporate Auditors in

fiscal 2008 was approved by shareholders at the Ordinary General

Meeting of Shareholders in 2007. The resolution limited the amounts

to 80 million per month for Directors, including 1.5 million applied

to outside Directors, and 12.5 million per month for Corporate

Auditors. At the Ordinary General Meeting of Shareholders in June

2009, the limits on fixed monthly compensation were changed,

granting 55 million to Directors, including 1.5 million applied to

outside Directors, and 11 million to Corporate Auditors.

3. Taking the huge net loss and planned reduction in dividends for fiscal

2008 into account, Dentsu did not pay typical June bonuses to

Directors in 2009. Therefore, the yen amounts in the table above do

not include bonuses for Directors. Outside Directors and Corporate

Auditors do not receive bonuses in any circumstances.

4. At the Ordinary General Meeting of Shareholders in June 2007, shareholders

approved payment of termination benefits to incumbent executives

following the discontinuation of the retirement benefits system for Directors

and Corporate Auditors. These benefits apply to the period from the

assumption of office until the end of the shareholders meeting in June

2007, with payment granted upon each executives resignation as Director

or Corporate Auditor. Future total termination benefits, estimated as of

March 31, 2009, are as follows:

Payment to 13 Directors (including one outside Director):1,823 million (1 million )

Payment to two Corporate Auditors (including one outside Auditor):20 million (10 million)

(A total of 11 million for two outside executives) Of these executives, one individual served both as a Director and aCorporate Auditor prior to approval of the aforementioned resolution

regarding payment of termination b

dentsu annual report for the year ended march 31 2009

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