Contents 02Dentsu Group Corporate Philosophy 03Dentsu Group Companies 05Dentsu in Brief 07 Operating Highlights 09 To Our Shareholders 11 Medium-Term

Management Plan 15 Special Features: Creative Ideas for Innovation 21 Corporate Social Responsibility 25 Corporate Governance 33 Managements Discussion and Analysis of Financial Conditions and Operational Results 44Data Section

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.

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Dentsu Group Corporate Philosophy

Entrepreneurship

Good Innovation.

Ideas

Technology

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. Slogan: Good Innovation.

The 3 Elements of Innovation Entrepreneurship +Ideas +Technology 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.

02

Dentsu Group Companies

Branding Services
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 Dentsu Meitetsu Communications. Joint ventures set up by Dentsu and overseas advertising companies mainly serve international clients. This segment also includes planning boutiques that specialize in creative services and advertising businesses for the pharmaceutical and fashion industries.

Media Services
Dentsu provides comprehensive media buying and planning services. In addition, Cyber Communications and other companies serve as media representatives for Internet and mobile advertising.

Total Advertising Services

Dentsu
Major regional subsidiaries Dentsu East Japan Dentsu West Japan Dentsu Kyushu Dentsu Hokkaido Dentsu Okinawa Ad Dentsu Osaka Dentsu Meitetsu Communications Joint ventures with foreign-owned companies Dentsu Young & Rubicam Beacon Communications Other advertising companies Frontage Ad Gear Planning Boutiques One Sky Build Creativehaus Bless You Shingata Shingata Azabu Shingata Soken Rewind Drill Dof Nakahata Dentsu Creative Force Watson-Crick Specialized Advertising Dentsu Sudler & Hennessey The Goal Media Shakers OOH Media Solution

Internet Advertising Cyber Communications Criteria Communications DA search & link OPT D2 communications

China
Spotlighting Beijing Dentsu Advertising, Dentsu has enhanced its ability to participate successfully in the 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 client base in China and extend the edges of the advertising perimeter.

Asia
In Asiathe overseas segment where Dentsu has established the deepest connections, in terms of history and traditionsthe Company has worked to expand business, with an emphasis on Japanese global clients. We have almost completed the two-brand media marketing network to serve competing clients in the same industries. Our next objective is to capture more local clients and to selectively reinforce services in the digital domain by enhancing the capacity of the overall network.
Phoenix Communications Dentsu Asia (Singapore, regional headquarters) (Republic of Korea) Dentsu Singapore Dentsu Innovak (Republic of Korea) Dentsu (Thailand) Media Palette Dentsu Plus (Thailand) (Media agency in Taiwan) Dentsu (Malaysia) Dentsu (Taiwan) Dentsu Utama (Malaysia) Dentsu Kuohua (Taiwan) Dentsu Vietnam Dentsu Alpha (Vietnam) Dentsu Indonesia Dentsu Philippines Dentsu Indio (Philippines) Dentsu Media (Media agency in Thailand) TUP-NA (Event production company in Thailand) Football Media Services (Sports marketing company in Singapore)

Overseas Markets

Beijing Dentsu Advertising Beijing Oriental Rihai Advertising Dentsu Hong Kong Dentsu TOP &c. Inc. (Internet advertising company)

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.

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(As of October 1, 2009)

Marketing Services
Dentsu offers expert solutions to the challenges that our clients face.

Content Business
The Dentsu Group is expanding its involvement in content marketing. Dentsu directly handles business related to video products and sports marketing. In addition, the companies listed below are developing their highly specialized content businesses in video, audio and other areas.

Dentsu Tec Dentsu Research Dentsu Public Relations Wunderman Dentsu Dentsu Table Media Communications Dentsu e-marketing One Video Research Dentsu Casting and Entertainment Drum Dentsu Direct Force ISID Dentsu Razorfish In-Store Communications

Dentsu Music and Entertainment Creative Associates Dentsu Sports Partners

India, Middle East

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

Europe and the Americas

In the United States, Dentsu has emphasized services for Japanese global companies. Under the leadership of U.S. management, Dentsu will use the acquisition of ATTIK Inc. and mcgarrybowen in the United States to attract 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 deliver coordinated services with characteristic Dentsu appeal. Dentsu Holdings USA (Holding company) Dentsu America (USA) McGarry Bowen (USA) Dentsu Sports America (USA, services related to international sports marketing) Dentsu Canada Dentsu Latin America Propaganda (Brazil) Dentsu Argentina Dentsu UK Sharp Image Creative Services (Production company in the United 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)

Dentsu Marcom (India) Dentsu Communications (India) Dentsu Creative Impact Lastminute Media (A Web site operating company for the sale of advertising spots) Clickstreamers India (An Internet advertising company in India) ClozR Customer Communications (A CRM solutions company in India)

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Leader in Japan, the Worlds Second-Largest Advertising Market

Other Countries 31.8%

Dentsu in Brief

United States 34.7%

Russia 2.2% Brazil 2.3% Italy 2.6% France 3.0% China 4.1% United Kingdom 4.6%

Japan 9.1% Germany 5.6%

Relative Scale of Advertising Markets, by Principal Media1 (2008)

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

Dentsu holds the top share of the Japanese advertising market, which constitutes 9.1% of the world total. The April 2009 edition of Advertising Age ranked the Dentsu Group the worlds fifth largest entity in the advertising communications industry in terms of 2008 gross profit.

Dentsus Advertising Market Position

(%) 50 40 30 20 10 0 2005 2006 2007 2008
Dentsu

(Billions of yen) 2,000 1,909.2

5.6% 14.0%

5.5% 13.6%

5.5% 13.6%

5.4% 14.0%

1,500

1,000

827.6

22.8%

23.2%

22.6%

22.4%

500 37.3% 0 Television

Hakuhodo

407.8 154.9 19.4% Newspapers

Daiko Advertising

15.8% Magazines
Yomiuri Advertising Asatsu-DK

14.4% Radio
Others

Dentsu HDY Asatsu-DK

Japanese Advertising Expenditure, by Percentage of Sales2 (2008)

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

Share of Principal Mass Media3 (2008)

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.

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.

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Highly Regarded Creative Skills

Ranking 1 2 3 4

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)

Others 40%

Dentsu 40%

4 6 7 8

ADK 5% Hakuhodo 15%

9 10

Ratings in Japan Comparison of TV CM awards 4 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.

Overseas Ratings Gunn Report s Most Awarded Agency Rankings6 (1999 2008)
6 : Source: THE GUNN REPORT AND SHOWREEL OF THE YEAR 2008

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

Dentsus Composition of Sales

Information/Communications 14.8% Others 25.8% Beverages/Cigarettes 10.0%

Content Services 5.7% Others 1.9% Marketing/Promotion 11.8% Television Time 23.7%

Creative 12.3% Hobbies/Sporting Goods 5.2% Distribution/Retailing 5.3% Pharmaceuticals/Medical Supplies 5.4% Home Electric Appliances/AV Equipment 5.9% Cosmetics/Toiletries 7.3% Automobiles/Related Products 7.2% Finance/Insurance 6.9% Foodstuffs 6.1% OOH Media 2.9% Interactive Media 1.8% Radio 1.5% Magazines 4.1% Newspapers 10.1% Television Spots 24.2%

Net Sales by Industry7 (Fiscal Year Ended March 31, 2009)

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

Net Sales by Business Category8 (Fiscal Year Ended March 31, 2009)
8 : Non-consolidated figures for the fiscal year ended March 31, 2009

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, sports and other content businesses.

Robust Financial Base Dentsu has a strong financial base, currently holding the highest Standard & Poors ranking of any advertising agency in the world.
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Long-Term Standard & Poors (S&P) Rating & Investment Information (R&I) AA AA

Short-Term A-1+ a-1+

(As of September 31, 2009)

Operating Highlights
Dentsu Inc. and Consolidated Subsidiaries Years Ended March 31

2005

2006

2007

2008

Millions of yen Thousands of U.S. dollars(1) except per share data except per share data 2009 2009

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)

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

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

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

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

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

$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

10,110.45 9,931.97 15 18.1 5.7 4.7 39.7 14.8

11,300.31 11,159.97 25 18.0 6.1 4.7 40.8 22.1

11,193.17 10,878.56 30 18.0 5.7 4.9 43.7 26.8

13,202.77 12,804.73 35 16.3 6.5 4.5 45.3 26.5

(79.61) 35 13.7 (4.0) 3.7 41.4

(0.81) 0.36

Notes: (1)U.S. dollar amounts have been translated from yen at the rate of 98.23 = US$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2009. (2)Diluted net income per share for the fiscal 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 split implemented in January 2009. (4)Operating margin = operating income gross profit 100 (5)ROE = net income (loss) average total shareholders equity based on total shareholders equity at the beginning and end of the fiscal 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

07

(Billions of yen) 2,500 2,000 1,500 1,000 500 0 2005 2006 2007 2008 2009

(Billions of yen) 500 400 300 200 100 0 2005 2006 2007 2008

(Years Ended March 31)

2009

Net Sales
(Billions of yen) 80 (%) 20 (Billions of yen) 40

Gross Profit
(%) 8

60

15

20

40

10

20

-20

-4

0 2005 2006 Operating income 2007 2008 Operating margin 2009

-40 2005 2006 Net income (loss) 2007 2008 Return on equity (ROE) 2009

-8

Operating Income, Operating Margin

(Billions of yen) 1,500 1,200 900 600 300 0 2005 2006 Total assets 2007 2008 2009 (%) 10 8 6 4 2 0 (Billions of yen) 600 480 360 240 120 0

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

(%) 60 48 36 24 12 0 2005 2006 2007 2008 Equity ratio 2009

Return on assets (ROA)

Total shareholders equity

Total Assets, Return on Assets (ROA)

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Total Shareholders Equity, Equity Ratio

To Our Shareholders

The advertising industry has entered a new era, and the Dentsu Group has embraced this as an opportunity to reestablish itself. President and CEO Tatsuyoshi Takashima discusses the Groups performance and business direction in the following interview. Q : Please summarize the Groups 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 each company 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 reversal 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 issues and 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

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-term management 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 2009 TM, 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 black, with a net income of 16.4 billion, compared with the fiscal 2008 net loss of 20.4 billion.
Consolidated earnings forecast is based on November 6, 2009 estimates.

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Medium-Term Management Plan

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 changed significantly. 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.

Clients Collaboration Internet Media companies companies Telecommunications Distribution companies companies

Clients

The Dentsu Group

Others

The Dentsu Group

Content providers

Media companies
Specialized companies

Platform Platform Platform

Consumers Platform bringing clients and consumers together

Consumers

Various groups, particularly consumers, clients and media, can share information seamlessly and execute transactions and buy and sell products directly with each other, with these activities recorded at the same time. This represents a revolution in communications and information delivery.

Dawn of the New Platform Era

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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 a range 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 the Groups intrinsic strengths, namely knowledge and ideas 2) Focusing on the media content business, which is vital to our ability 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.

Strengths intrinsic to the Dentsu Group

To be acquired or newly built

Knowledge (insight)

Extensive and detailed consumer information

Resulting competitiveness

Quality solutions for clients

Creativity (ideas)

New channels of information and distribution

New business model for the new platform

Reinforce marketing and intelligence

Planning tools and methods direct solutions Integrated Marketing Communications (IMC) campaign planning media planning tools customized for clients

Media content business product development with existing traditional media companies new media service development new business with key players new market development

Technologies

database marketing business infrastructure new information delivery system rich content distribution infrastructure

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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 platform era. Measures will be promoted to facilitate concrete activities in these five areas and 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 portfolio 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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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.

Business

Targets Consolidated operating income: 70 billion Operating margin: 20% or higher ROE: 8%

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Creative Ideas for Innovation

Special Feature 1: Creative Interview

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 platform eraand 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
15

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 participationproviding financial and human resourcesin 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 and magazines 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.

Profile Akira Kagami Executive Officer, Global Executive Creative Director Dentsu Inc. (From June 2007) Joined Dentsu in 1971. He worked first as a strategist, and then as a copywriter. In his own creative work, he has been recognized with numerous domestic and international awards, including Japans ACC Grand Prix, Cannes Lions and AdFest Grand Prix. He has also participated in judging panels. In 2002, he became the first person from Asia to chair AdFest, the largest advertising awards event in Asia, and in 2009 he became the first Japanese person to chair a Cannes Lions jury. His major projects include The Nonlife Insurance Series for The Tokio Marine & Fire Insurance Co., Ltd.; Lucas and Friends, Maclord and National no Akari for Panasonic Corporation; and The Running Woman and The Birdman for WOWOW INC., a cable TV satellite broadcasting company in Japan.

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 core idea 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 creative departments, 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 Global 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.
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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 of putting 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 consumers over 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.

Creative Ideas for Innovation

Special Feature 2: Dentsu-style cross-media communication planning

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
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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 show provided 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 December 31, 2008, the movies on the YouTube iQ channel had been viewed more than one million times. The use of a video-sharing site to create some iQ

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 Structure and Components of Paradigm Change Campaign

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.

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 approaches to advertising

YouTube: Create a buzz

Event Co-Sponsorship: Raise iQs profile

Ginza Sony Building

iQ Channel

Live event

Art exhibition

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

Invited 2,000 YouTube users to a live event Showcased new-concept value through innovative two-brand collaboration, spotlighting for which Toyota was the main sponsor the Somarta fashion brand and Toyotas iQ

Launch (November 20, 2008 ): Interactive communication format linking YouTube and special site to cultivate a fan base
Product Ads: Elicit demand

Special Web site: Spur interest and promote understanding

YouTube: Create a fan base

Television commercials linked to iQ Amazing Films

Web-based ads linked to iQ Amazing Films

New Way iQ World

iQ Amazing Films

iQ Visual Mix Contest

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

Amazing Films streaming online

Participatory content

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.

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Creative Ideas for Innovation

Special Feature 3: Media Neutral Creativity Thinking Outside the Box

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 the depth 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 fashion choices 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
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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 UNIQLO that 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 the 1,000 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 in each 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 expressionunderpinned 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.

The Tokyo Fashion Map

TOKYO FASHION MAP with UNIQLO magazine

Parka relay movie screenshots

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Advertising Elementary School

Corporate Social Responsibility

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

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 reputation for 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.

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Seminar to improve communication skills for NPOs

Dentsu-China Advertising Educational Exchange Project

UNESCO World Terakoya Movement

Fifth anniversary forum, in March 2009

Dentsu received a certificate of appreciation from Chinas Ministry of Education at the 4th Advertising Education Seminar

Outside view of a Terakoya school in Cambodia, pictured in 2006

ECO FIRST

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 request from 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 field of education. In September 2009, Dentsu was presented with a certificate of appreciation for 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 UNESCO Associations 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 Mark To 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.

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CO 2 (Tons) 30,000 28,338 27,500 26,323 25,000 25,819 25,880 24,253

22,500

20,000 2005 2006 2007 2008 2009 Dentsu Green Event Guide 62nd Dentsu Advertising Awards: Environmental Advertising Award Winning advertiser: TOSHIBA CORPORATION Manufacturing light goes out on ordinary incandescent bulbs

CO2 Emissions (Years ended March 31)

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.

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 the Dentsu 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.

CO2 Reduction We aggressively embrace measures to reduce carbon dioxide (CO2) 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 update on the status of planned measures. For Dentsu, the goal is to cut CO2 emissions from the head office by 13% by fiscal 2009, ending March 31, 2010, relative to the amount generated in fiscal 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 for environmental 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.

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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)

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 invite Group 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 within the 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.

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. Essentially, 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 the participating 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.

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Corporate Governance

Status of Corporate Governance 1. Basic Policy on Corporate Governance In January 2009, the Dentsu Group unveiled a new corporate philosophy embodied by the slogan Good Innovation. Given the turbulent changes in our operating environment and the evolving status of our business domain, innovation now requires much more than simple technological originality. Innovation has become a broad-based process to derive new, socially significant value from fresh ideas and to generate major social change. With this in mind, we seek to be an integral contributor to a brighter, happier future for society as a whole. In the current difficult business climate, the entire Group will embrace new challenges, empowered by a spirit of innovation, and strive to elicit this quality in society for all stakeholders, including clients, media companies and content holders. In the process, we will seek to earn the high regard of society and raise corporate value. The foundation for this innovation-driven approach requires a business management system that expedites responses to changes in the business environment and a management structure that prioritizes compliance. The Group has worked to lay this foundation along with efforts to reinforce its business execution system. In June 1999, Dentsu introduced an executive officer system to strengthen its business execution function. In April 2009, the Company introduced a director and executive officer system, which retains the old executive officer system but clarifies the roles and responsibilities of Directors and Executive Officers more precisely. Efforts to establish a highly effective management and business execution system are under way. The Company operates under the corporate auditor system, and management believes that the current corporate governance framework is sufficient to ensure rapid decision making and effective internal controls.

2. Overview of Corporate Institutions Dentsu is a Company with Board of Corporate Auditors and has introduced an executive officer system for the execution of business. Dentsus Articles of Incorporation specify the term of office for Directors as one year or less and specifies the number of Directors as 15 or fewer. As of June 26, 2009, the number of Directors was 12 (including two outside Directors). Dentsus Articles of Incorporation specify the term of office for Corporate Auditors as four years as per laws and regulations and the number of Corporate Auditors as five or fewer. As of June 26, 2009, the number of Corporate Auditors was five (including three outside Auditors). In addition to the Board of Directors, principal decision-making bodies include the Board of Senior Managing Directors and several important committees. 3. Items for Resolution by the General Meeting of Shareholders that May Be Approved by the Board of Directors The Company has set forth provisions in the Articles of Incorporation that grant the Board of Directors the authority to approve items that would otherwise be presented to the General Meeting of Shareholders for resolution. These items are listed below. Acquisition of Our Own Shares Dentsus Articles of Incorporation stipulate that the Company may, by resolution of the Board of Directors, acquire the Companys own shares through such methods as market trading, pursuant to Section 2, Article 165 of the Corporate Law to ensure an agile and flexible capital policy. Interim Dividends To promote the flexible return of profits to shareholders, Dentsu maintains a provision in the Articles of Incorporation, in accordance with Section 5, Article 454 of the Corporate Law, allowing the Board of Directors, by its resolution, to grant interim dividends to registered shareholders, as of September 30 each year.

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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 who hold 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.

General Meeting of Shareholders

Appointment

Appointment Conducting of audits

Appointment

Independent Auditors

Corporate Auditors/ Board of Corporate Auditors

Board of Directors

Corporate Auditors Office

Conducting of audits

Appointment/ Supervision Representative Directors

Internal Audit Division Conducting of internal audits Conducting of audits

Executive Officers and Their Respective Divisions

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 all laws, 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.

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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 violates prevailing 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 and proposal 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 the Companys compliance system, Directors and Executive Officers respond without delay and make any necessary improvements. The Company has established a department to facilitate the termination of existing business relationships with organized crime groups and elements thereoftermed antisocial forces in Japanwhen 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 Managing Directors and important committees are quickly delegated to Managing Directors from individual Directors or Executive Officers and transmitted to all employees via the 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 operations or 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 Independent Auditors 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 its subsidiaries 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.
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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 internal audits 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.

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.
Name of Company to which These Accountants Belong

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 individuals carry 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 Press. 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 office, 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.

Names of Certified Public Accountants Takashi Nagata Hitoshi Matsumoto Designated and engagement partners Tsutomu Hirose Takashi Sedo

Deloitte Touche Tohmatsu

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.

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10. Executive Compensation Total Compensation Paid in Fiscal 2008

Directors (Outside Directors) Number 19 (2) Amount paid 735 million (13 million) Corporate Auditors (Outside Auditors) Number 8 (5) Amount paid 121 million (32 million) Total (Outside Executives) Number 26 (7) Amount paid 856 million (45 million)

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, one of 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 a Corporate Auditor prior to approval of the aforementioned resolution regarding payment of termination benefits at resignation. Estimated termination benefits for this executive, as a Director and as a Corporate Auditor, are included in the figures above. Directors and Corporate Auditors who resigned their offices at the conclusion of the General Meeting of Shareholders in June 2008 were paid termination benefits in line with the resolution approved at the General Meeting of Shareholders in June 2007 regarding payment of termination benefits at resignation. The amounts are as follows: Payment to two Directors: 204 million Payment to three Corporate Auditors (including two outside Auditors): 132 million (22 million)
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5. In addition to the payments outlined above, the Company pays retirement benefits in annual installments to executives who have already resigned. The aggregate amounts in fiscal 2008 came to 49 million for eight Directors and 8 million for two Corporate Auditors. Future retirement benefits in annual installments, estimated as of March 31, 2009, are 199 million for eight Directors and 31 million for two Corporate Auditors. Summary of Policy on Determining Executive Compensation At the conclusion of the Ordinary General Meeting of Shareholders held on June 28, 2007, retirement benefits to Directors and Corporate Auditors were abolished. In accordance with this abolition, future compensation is to be determined as follows. To encourage the link between compensation to Directors and further increases in corporate value and in consideration of their accountability and relation to operating performance, compensation to Directors is to be divided into two components. One component of compensation is monthly, and the other is a bonus tied to operating performance. If operating performance is typical, the performance-linked portion will account for approximately one-third of overall compensation. The fixed monthly compensation shall be determined within the limits of compensation approved by the General Meeting of Shareholders. The index used to determine the portion of compensation that is tied to operating performance will include the degree to which financial targets for consolidated gross profit and consolidated operating income have been reached. Specific amounts are to be determined at the General Meeting of Shareholders held after the conclusion of the fiscal year. Compensation to outside Directors, however, will consist solely of fixed monthly compensation in exchange for the execution of their duties. Compensation to each Director will be determined by resolution of the Board of Directors.

Compensation to Corporate Auditors will consist solely of fixed monthly compensation in exchange for the execution of their duties. The gross amount of this monthly compensation will be determined within the limits of compensation approved by the General Meeting of Shareholders. Compensation to individual Corporate Auditors will be determined through deliberation of the Corporate Auditors. Compensation to the Independent Auditors 1. Compensation to the Independent Auditors (Certified Public Accountants)
Fiscal 2007 Compensation for Category independent auditing services (Millions of yen) Parent company Consolidated subsidiaries Total Compensation for non-auditing services (Millions of yen) Fiscal 2008 Compensation for independent auditing services (Millions of yen) 139 185 324 Compensation for non-auditing services (Millions of yen) 22 8 30

2. Other Significant Details Regarding Compensation For the financial statements of overseas consolidated subsidiaries, compensation of 38 million for services regarded as equivalent to independent auditing services was paid to accountants belonging to the same corporate network as the Companys independent auditing firm, Deloitte Touche Tohmatsu. 3. Details of Non-Auditing Services Provided to the Parent Company by the Independent Auditors Dentsu paid for guidance and consultation services on the preparation and establishment of internal controls for financial reporting.

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4. Policy for Determining Compensation to the Independent Auditors Compensation for audits performed by the Companys Independent Auditors is based on overall consideration of such factors as the content of the audits performed in previous fiscal years and the content of the auditing schedule presented by the Independent Auditors for the fiscal year under review.

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Managements Discussion and Analysis of Financial Conditions and Operational Results

Dentsu Inc. and Consolidated Subsidiaries As of June 26, 2009

Any forward-looking statements in the following discussion are based on the Dentsu Groups judgment as of the date of submitting the Financial Reports. Overview Dentsu (hereafter, Dentsu or the Company) and the group it leads (hereafter, the Dentsu Group or the Group) substantially derives its revenue from promotional and communication services, notably advertising services in the four traditional mass media (newspapers, magazines, radio and television) and related creative services, including the planning and production of advertising. The Groups activities also include:
promotional services; billboard, transit and other out-of-home (OOH) media advertising; advertising and related services encompassing interactive media, such as the

Internet and mobile phones, as well as satellite broadcasting; and other services, such as sports and entertainment marketing, event planning and execution, public relations, public affairs, direct marketing, market research and e-solution services. In fiscal 2008, ended March 31, 2009, advertising sales to clients accounted for approximately 95% of consolidated net sales. Invoices to advertisers for advertising expenditure accounted for most of this amount. Sales of the information services segment came primarily from the information processing services and the consulting business of Information Services International-Dentsu, Ltd., a Dentsu subsidiary. The Group is particularly active in Japan but is developing a worldwide network that includes the rest of Asia as well as Europe and the Americas. In fiscal 2008, overseas sales accounted for approximately 8.7% of net sales. Significant Accounting Policies and Estimates The Dentsu Groups consolidated financial statements are prepared on the basis of generally accepted accounting principles in Japan (Japanese GAAP). In the preparation of these consolidated financial statements, the management
33

must disclose the amount of contingent liabilities and other off-balance-sheet transactions implicit in the reported asset and liability figures as of the date the accounts are closed. Management must also estimate the impact of these figures on the Groups financial condition and operating performance during the reporting period. Management continuously evaluates forecasts and assumptions regarding such items as allowance for doubtful accounts, investments and corporate taxes, as well as financing activities, retirement benefits, contingencies and litigations. Management bases its estimates and assumptions on rational consideration of several factors, given past performance and conditions. These results underpin assumptions regarding asset and liability book values, reported revenue and expense figures. However, uncertainties are inherent in such results and estimates may vary from actual results. The significant accounting policies described below are those that management considers to have specific potential to affect the financial standing and operating performance of the Group. Such policies may also include important assumptions and estimates used in creating the Companys consolidated financial statements and therefore have a material impact on these statements. Revenue Recognition Consolidated revenue consists primarily of compensation received from media companies for the placement of advertising into different media formats and payments received from advertisers and other clients for providing services, such as assistance in the production of advertising, including creative services, and various content-related services. Commission revenue is recognized when the media placement appears. Other revenue is recognized when the service is complete, as specified in client contracts, or purchase orders, and collection is reasonably assured. Commissions are the fees received by Group companies from media companies for the sale of media time and/or space to advertisers. In Japan, advertising companies generally purchase media time and/or space from media companies at the request of advertisers and resell the purchased time and/or space to the advertisers at the same prices as those charged by the media

(Billions of yen) 2,500 2,000 1,500 1,000 500 0 2005 2006 2007 2008 2009

(Billions of yen) 500 400 300 200 100 0 2005 2006 2007 2008 2009

Net Sales

Gross Profit

companies to the advertising companies. Commissions received by the Dentsu Group for the placement of advertising are typically a percentage of the price advertisers pay for the media time and/or space. This percentage is generally negotiated between the Group company and the relevant media company. In practice, however, prevailing industry custom dictates that the commission portion be netted against payment due to the media company with the balance paid to that company. In the Dentsu Group, the entire price charged to the advertiser for media time and/or space is recorded as net sales and the amount paid to the media company is recorded as cost of sales. Revenue from the production of advertising and other advertising services consists of payments made by advertisers and other clients to the Group company as compensation for such services. Payments for these services are generally negotiated as a markup on the prices charged to the Group companies for services provided by third parties and/or Dentsu subsidiaries. In some cases, the Group companies may also agree to a fixed fee or other compensation arrangements. Allowance for Doubtful Accounts An amount is recorded as allowance for doubtful accounts, based on estimated losses that might occur if expected amounts from clients become uncollectible. If the financial conditions of advertisers or other clients deteriorate and their ability to pay decreases, this allowance may have to be raised. Impairment Losses on Investments To ensure continuous growth into the future, the Group pursues investments in new businesses and overseas businesses and undertakes investment opportunities with partners. These investments include shares in publicly listed companies with high price-variability as well as shares in unlisted companies with difficult-to-determine share values. In the event that a decline in the value of an investment is determined to be something other than temporary, an impairment loss is recorded on that investment. If market conditions worsen or the performance of an investment target deteriorates, unrecoverable investment or losses not reflected in current book values may arise, requiring the booking of valuation losses.
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Deferred Tax Assets The Dentsu Group books consolidated deferred tax assets, based on future taxable income and persistent tax planning that emphasizes cautious and highly implementable approaches. However, if management decides that some or all of these deferred tax assets are unrecoverable, these assets may have to be recorded as expenses for the period when that decision is made. Accrued Pension and Severance Costs Retirement benefit costs and obligations are recorded on the basis of pension actuarial calculations. These calculations take into account such factors as the discount rate, future compensation levels, employee turnover, mortality rates based on recent statistical values and expected rates of investment return on plan assets. If the actual values of these factors stray from their forecast values, or if the assumptions that underlie these values change, regulatory requirements obligate the Dentsu Group to record the cumulative impact of these changes in the future. In all likelihood, the Dentsu Group will be impacted by the recognition of such costs or by the recording of such obligations in the future, on a consolidated basis. Performance Results for Fiscal 2008 Net Sales and Gross Profit Consolidated net sales for fiscal 2008 reached 1,887.1 billion, down 8.3%, over fiscal 2007. Of this amount, the advertising segment contributed 1,801.1 billion, or 8.0% less than a year earlier. The decrease is largely due to sluggish demand in all four traditional mass media formats, which overshadowed an increase in interactive media advertising. Up until fiscal 2007, the information services segment was included in the other business segment. From fiscal 2008, this segment is reported separately. If the change had not occurred, sales by the other business segment would have been 113.3 billion for fiscal 2008, or 13.6% less than a year earlier. Under the new segment classification, the information services segment

(%) 20

(Billions of yen) 40

(%) 8

15

20

10

-20

-4

0 2005 2006 2007 2008 2009

-40 2005 2006 Net income (loss) 2007 2008 Return on equity (ROE) 2009

-8

Operating Margin

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

accounted for 75.1 billion of net sales. This segment hinges on Information Services International-Dentsu, Ltd., which focuses on IT solutions, particularly information system configuration. The market for information services was tough in fiscal 2008, owing to noticeably tighter corporate IT spending in the second half. The other business segment, in its streamlined form, generated 38.3 billion. The overseas segment saw sales fall 9.3%, to 178.4 billion. Rapid deterioration of the global economy, triggered by financial instability in the United States, led to poor conditions beyond North America and into Asia, eroding sales overall. Owing to the lower net sales starting point, gross profit slipped 8.9% over fiscal 2007, to 314.4 billion. The gross profit ratio dipped 0.1 percentage point, to 16.7%. Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses reached 271.2 billion for the Group in fiscal 2008, down 6.2% from fiscal 2007. This reflects lower personnel costs and a reduction in operating costs, thanks to cost-cutting efforts, especially on communication and traveling expenses. Salaries accounted for 43.1% of gross profit, up 2.2 percentage points. Operating Income, Non-Operating Expenses and Net Loss Efforts to trim selling, general and administrative expenses were successful, but the decrease was not enough to offset lower gross profit, and operating income retreated 23.1%, to 43.1 billion. Also, the Dentsu Group shifted to a consolidated loss position on investments in partnership, from the income position achieved in fiscal 2007, erasing the benefits of higher equity in earnings of affiliated companies, including Publicis Groupe. Consequently, non-operating income declined 3.1%, to 14.5 billion while non-operating expenses jumped 38.3%, to 4.4 billion. Owing to a 51.1 billion loss on valuation of investment securities, due to impairment treatment, the Dentsu Group showed a loss before income taxes and minority interests of 4.9 billion, a turnaround from 63.6 billion in income before income taxes and minority interests in fiscal 2007. Consequently, after income taxes, deferred income taxes and minority
35

interests, the Dentsu Group posted a consolidated net loss of 20.4 billion. This compares with consolidated net income of 36.2 billion in fiscal 2007. Factors Affecting Performance Revenue Consolidated revenue comes primarily from advertising services in the four traditional mass media formats and advertising-related services, mainly interactive media and OOH media, as well as related creative services. Commissions from media companies on the sale of media time and/or space represent the largest contribution to revenue, with the key revenue source being commissions for advertising time and/or space through the four traditional mass media formats. The main factors affecting revenue from advertising in the four traditional mass media formats are described below. Domestic advertising expenditures, which fluctuate with new industry realities, such as general economic conditions, technological innovations, deregulation and heightened competition The Groups competitive position vis--vis other advertising companies in Japan Rates charged by media companies for media time and/or space Changing advertiser needs for advertising among different media A strong correlation exists between increases in domestic advertising spending and the state of the Japanese economy. Therefore, management applies nominal gross domestic product (GDP) growth as a point of reference when gauging trends in advertising spending. The domestic recession that unfolded in Japan in fiscal 2007 continued into fiscal 2008, but the situation became increasingly inhospitable for the corporate community as well as households in the second half as the financial fire ignited in the United States erupted into a global economic crisis. According to its report to an extraordinary session of the Cabinet on April 27, 2009, the Cabinet Office estimated that nominal GDP growth contracted 3.2% year on year in fiscal 2008 and marked the first backtracking in six years.

Against this backdrop, in calendar 2008 advertising expenditures in Japan retreated for the first time in five years, dropping 4.7% over calendar 2007, according to Dentsus own researchrevised in 2007 to extend the estimate range retroactively to calendar 2005. Spending was relatively brisk in the first half of the year, but reversed course in the second half despite the boost from the 2008 Summer Olympics in Beijing, because of major repercussions stemming from the global financial crisis and yen appreciation. Advertising expenditures in the traditional media categories were down for the fourth consecutive year, while spending on Internet advertising continued to rise, climbing 16.3% over the previous year. The Internet is firmly in second place, behind television, as the medium garnering the most contact time in homes across Japan. As the media environment evolves, the needs of advertisers become increasingly sophisticated. Advertisers are particularly interested in media planning that is made all the more effective and efficient through the integration of Internet, mobile and other interactive media with the traditional mass media formats. The Dentsu Group strives to provide value-added cross-media campaigns to accurately address these needs. Recent trends indicate heightened appreciation for integrated services that cover a broad spectrum of media domains and tools that verify cost efficiency and advertising effectiveness. This will underpin an increase in transactions with big advertising agencies. The Group frequently provides promotional services and other advertising services in combination with traditional mass media advertising. For example, in promotional services, clients typically combine advertising campaigns in traditional mass media with point-of-purchase displays, promotional events and other approaches to encourage consumers to buy the client companys products or subscribe to its services. Demand for traditional mass media advertising may fluctuate independently of demand for combination services, but the factors that influence one type of advertising will impact the others as well. The Group also secures revenue from services related to entertainment and sports marketing. These services include the production, marketing and establishment of marketing tie-ins for and the selling or brokering of sponsorship, broadcasting and other rights to such content as movies, sporting events, music and other forms of entertainment. A breakdown of revenue from such services shows net proceeds or
36

commissions on the purchase and sale of content-related rights, returns on rights or interests in content owned as well as payments for services. Revenues may vary, depending on such factors as the location and timing of the entertainment and sporting events, the terms under which companies under the Group umbrella acquire rights, the level of consumer demand for, or interest in, the associated content, and the level of demand for these rights, especially by advertisers and broadcasters. In addition, the Group earns revenue from solutions services, including customer relationship management (CRM), e-marketing and system configuration. Revenue from these services is not only affected by factors that impact advertising services, but also by investment trends pertaining to system development. The Group also obtains revenue from advertising services outside Japan. The issues that influence revenue in Japan do not differ all that much from issues that impact revenue generated outside Japan. However, trends in revenue may differ among the countries in which the Group operates, based on such factors as the business climate in each country, developments in specific industries, the competitive position of Group companies vis--vis other advertising agencies, as well as market practices regarding compensation for services and shifts in advertiser demand for advertising among different media. Exchange rates between the yenthe Dentsu Groups reporting currencyand the currencies of other countries in which the Group operates may also have an effect on revenue from overseas advertising services. Selling, General and Administrative Expenses The largest component of SG&A expenses is employees compensation, including bonuses. Other significant components of SG&A expenses include the provision of a reserve for employees retirement benefits, payments to third-party service providers, borrowing costs and welfare benefit expenses. In fiscal 2002, Dentsu introduced a remuneration system linking a portion of employee compensation to the Companys financial performance to make personnel expenses more flexible. However, personnel costs may increase in the future, as the Company develops its human resources. Factors that affect the provision of a reserve for employees retirement benefits

(Billions of yen) 1,500 1,200 900 600 300 0 2005 2006 Total assets 2007 2008 2009

(%) 10 8 6 4 2 0

Return on assets (ROA)

Total Assets, Return on Assets (ROA)

include changes in the value of pension plan assets, the number of Group employees, the level of employee compensation and the terms of the pension and severance plans. Depreciation costs incurred in connection with the consolidation of Dentsus offices into a new head office building in November 2002 peaked in fiscal 2003 and continue to decline. Depreciation costs are partially offset by rental income from tenants leasing office space in the head office building and an adjacent building. Current Status of Growth Strategies and Outlook Repercussions from the rapidly deteriorating global economy have had a considerable impact on the operating environment of the Group. The industry landscape has also changed, characterized by slower growth in the domestic advertising market, wider representation by non-traditional mass media, diversifying client needs and an accelerating shift among clients to expand their operations abroad. The poor business climate may have hastened the pace of structural changes in the advertising industry, but the trends are likely to continue even when business conditions improve. Given this backdrop, management believes that solutions utilizing the inherent experience and expertise of the Group will be strategically important to growth over the medium to long term. The optimized, integrated solutions that the Group seeks to offer will turn both wheels of the service cart, that is, client and media services. The Group will promote its solution-oriented capability worldwide to reinforce Dentsus consolidated revenue base. Specifically, this means providing support from a consumer perspective across the client value chain, from upstream to downstream. Support will start with advertising and promotional activities but extend to services that facilitate product development and management and business strategies, and the Group will strive to enhance the quality of these broad-based services. Concurrently, increasing fragmentation of consumer lifestyles and progress in digitization have been catalysts for drastic changes in the media environment. Given these changes, the Group will endeavor to create new value and cultivate demand for various media, including but not limited to the four traditional mass media. In reinforcing the Groups solution capabilities, management will spotlight the digital domain. Joint activities will be encouraged throughout the Group and
37

marketing skills will be enhanced. In the mobile domain, which presents phenomenal growth potential, joint activities will boost product value and expand earnings. Management wants the Group to hone a sharper competitive edge by fine-tuning functions and improving specialization among Group companies in the digital domain. Management also aims to strengthen the Groups solution capabilities overseas. In Europe and the Americas, activities will hinge on the recently acquired mcgarrybowen, and the goal will be to attract the attention of not only Japanese clients but also clients with a global presence, as well as clients dedicated to the local market. New developments in Brazil, Russia, India and Chinathe BRICsinclude the establishment of Dentsu-Smart LLC in Russia and efforts to cement a stronger position in the promising markets of China and India. To secure profits, management remains committed to cost reforms that underpin the Groups financial status. The short-term emphasis highlights the constant review of operating expenses and measures to trim costs throughout the Group. The medium- to long-term focus will be on shifting essential personnel into growth domains to fortify solution capabilities and sharpen the Groups competitive edge while streamlining back office sections. Management will continue to emphasize training for employees and endeavor to optimize Group management. Analysis of Capital Resources and Capital Liquidity Assets, Liabilities and Net Assets As of March 31, 2009, total assets stood at 1,092.5 billion, down 159.3 billion from a year earlier, reflecting reduced current assets, including notes and accounts receivabletrade, due to a drop in net sales, as well as impairment accounting and lower investment securities paralleling a drop in market prices. Total liabilities also declined, down 41.6 billion, to 619.3 billion, despite an increase in loans because of a decrease in current liabilities, including notes and accounts payabletrade. Total equity fell 117.7 billion, to 473.1 billion, reflecting the purchase of treasury stock through tender offers and market buying as well as lower valuation and translation adjustments paralleling such developments as yen

(Billions of yen) 600 480 360 240 120 0 2005 2006 2007 2008 Equity ratio 2009

(%) 60 48 36 24 12 0

Total shareholders equity

Total Shareholders Equity, Equity Ratio

appreciation and a decline in the market price of investment securities. Cash Flows Cash and cash equivalents (hereafter, cash) at March 31, 2009, amounted to 57.2 billion, down 12.9 billion from 70.2 billion a year earlier. Net cash provided by operating activities was 42.3 billion, down 13.6 billion. Although Dentsu suffered a 4.9 billion net loss before income taxes and minority interests on a consolidated basis, the loss was principally attributable to non-cash items that include the write-down of investment securities of 51.1 billion. Net cash used in investing activities came to 22.2 billion, up from 18.0 billion a year earlier. Although Dentsu allocated less to the purchase of investment securities in fiscal 2008 than in fiscal 2007, the Company applied 4.1 billion to the purchase of equity in consolidated subsidiaries, notably shares in Cyber Communications Inc. Net cash used in financing activities reached 27.7 billion, down from 30.7 billion a year earlier. In fiscal 2007, net cash used in financing activities was primarily repayment of loans, while in fiscal 2008, the target was mainly the purchase of treasury stock. Capital Requirements The Groups principal operating capital requirements are payments for the purchase of advertising time and/or space and the production of advertisements, as well as personnel costs and other selling, general and administrative expenses. In recent years, capital requirements have increased for investments in the digital and global domains in the course of exploring different advertising opportunities. Financial Policy The Group satisfies its consolidated working capital requirements from internal reserves, short-term borrowings and the issuance of commercial paper. The Group is committed to maintaining a positive working capital position (current assets minus current liabilities), on a consolidated basis. In fiscal 2007 and fiscal 2008, consolidated working capital exceeded 113.4 billion and 96.2 billion, respectively. To ensure short-term liquidity, a 50 billion commitment line was established
38

with a syndicate of banks for Group use. To improve cash management, a Groupwide finance system is in place that enables almost all domestic consolidated subsidiaries that require funding to borrow funds that Dentsu has acquired for this purpose from other domestic consolidated subsidiaries with excess cash. Standard & Poors currently gives Dentsus long-term debt a rating of AA(Outlook: Stable) and its short-term debt a rating of A-1+. Japanese rating agency Rating and Investment Information, Inc. (R&I), has assigned a rating of AA (Outlook: Stable) to Dentsus long-term debt and a rating of a-1+ to its short-term debt. Management Issues and Future Policies The Group faces extremely challenging business conditions. In calendar 2008, the domestic advertising market contracted for the first time in five years, shrinking 4.7% year on year, according to Dentsus self-sourced 2008 Advertising Expenditures in Japan. This decrease reflects rapidly deteriorating business conditions caused by problems paralleling the worldwide economic crisis, sluggish consumer spending and a more cautious approach to advertising by profit-squeezed, budget-conscious companies. A breakdown of expenditures by medium shows a 7.6% drop for traditional mass media but high growth for other formats, particularly Internet advertising. Meanwhile, advertisers marketing needs are becoming more sophisticated as they try to get consumers in a spending frame of mind, and some corporate clients are accelerating development of business activities abroad. For growth in the years ahead, the Dentsu Group must embrace a model better geared to evolving industry conditions. Management is therefore stressing three catchwords for success: solutions, digital and global, in reference to advertising solutions, the digital media domain and global operations. Clients will be placing greater emphasis on how well the advertising industry can deliver optimum solutions to their increasingly complex requirements. The industry will have to acquire a deeper understanding of the wide range of issues facing clients, from management and business concerns to communication solutions, then design solutions overflowing with creativity and ensure reliable implementation. Given the impact of digitization on media and consumers, solutions will have to be planned out as comprehensive, cross-media approaches that combine the

four traditional media with digital media, content and creative expression. Concerted efforts to provide solutions for global application that are equal in terms of quality to those offered in Japan will be integral to the Groups business success. A strategic focus on solutions, digital and global activities will enable the Group to deal with the challenging operating environment. In January 2009, the Dentsu Group unveiled a new corporate philosophy embodied in the slogan Good Innovation. Considering the turbulent changes in the operating environment and the evolving status of the Groups business pursuits, innovation has become much more than simple technological originality. Innovation is now a broad-based process to derive new, socially significant value from fresh ideas and generate major social change. With this in mind, management expects the Group to play an integral role in the creation of a brighter, happier future for society as a whole. Managements actions are always guided by thoughts of how the Group can contribute to society. With the trust and high regard of all stakeholders, each company under the Group umbrella will strive to fulfill its responsibility as a member of society and a member of a business group seeking to maximize corporate value. Operating and Other Risks The operating results, share price and financial position of Dentsu and, by extension, the Dentsu Group, are subject to various risks, as described below. Overall Industry-Related Risk Fluctuations in the economic and business environments The business performance of advertising agencies, including the Dentsu Group, are highly susceptible to changes in the market and business and economic conditions because many advertisers adjust their advertising budgets up or down in response to market changes and evolving business and economic conditions. Management has taken steps, such as diversifying the types of services the Group provides, to reduce exposure to the impact of fluctuations in the economic and business environments. Nonetheless, since net sales in Japan account for about 90% of consolidated net sales, the Dentsu Groups consolidated financial results may be
39

influenced by domestic macroeconomic trends and fluctuations in the operating environment of key domestic industry sectors having significant advertising expenditures. Risk related to structural changes in the media According to 2008 Advertising Expenditures in Japan, issued by Dentsu, Internet advertising expenditures have grown by double-digit leaps every year since the first survey in 1996, surpassing radio advertising expenditures in 2004 and magazine advertising expenditures in 2006, and capturing a 10.4% share in 2008. On the other hand, advertising expenditures for the four traditional mass mediathat is, newspapers, magazines, radio and televisiondeclined for the fourth consecutive year since 2005 but still accounted for a significant 49.3% in 2008. Management believes that the development of an Internet-based advertising method will raise synergies between traditional media advertising and Internet advertising and help to expand the advertising market overall. As of June 2009, the Dentsu Group already enjoyed a leading status for advertising in the four traditional media as well as over the Internet, and is seeking to explore and expand additional business opportunities. However, if the Group cannot cope appropriately with these structural changes, financial results could be adversely affected. Video Research Ltd. conducted a survey on daily media contact by consumersthat is, how many hours do people spend in contact with media each dayin the Tokyo area in 2008. According to the results, people spent an overwhelming 215.1 minutes watching television, compared with 72.4 minutes for the Internet. Nevertheless, if consumers media contact behavior changes drastically in the future, demand for traditional mass media, which accounts for more than half of consolidated net sales, could change and consolidated financial results could be adversely affected. Risk related to common business practices in Japan The common practice in Japan is for advertising agencies to purchase time and/or space from media companies on their own behalf, rather than on behalf

of advertisers. Accordingly, Group companies that purchase time and/or space are liable for payment to media companies, regardless of whether they receive payment from their advertiser clients. This practice exposes the Dentsu Group to the risk of default should an advertiser clients business fail. The nature of the advertising business in Japan is such that sudden changes in advertising plans and content are frequent. Group companies involved endeavor to preclude problems related to work for clients by concluding basic written agreements with them, but unforeseen incidents or disputes could arise. Overseas, especially in Europe and the Americas, relationships between advertisers and advertising agencies are usually exclusive within a particular industry. In Japan, however, these relationships are typically less exclusive. Accordingly, the Dentsu Group, like other advertising agencies in Japan, may handle multiple clients in a single industry on its own or through subsidiaries and affiliates. If the practice in Japan were to change in favor of exclusive relationships, and if the Groups efforts to respond to this change were ineffective, its financial results could be adversely affected. Competition-Related Risk Risk related to competition among advertising agencies Competition among Japans advertising agencies is fierce. Business integration among domestic companies and entry by foreign companies into the Japanese market could alter the industry structure. If, in the future, competition to secure clients becomes even more intense or if the Group is unable to respond appropriately to changes in the industry structure or new business practices prompted by the entry of foreign advertising agencies into the Japanese market, consolidated financial results could be adversely affected. Risk related to competition from new market entries from adjacent industries As the Groups business domain expands, it opens the door to rivals from adjacent industries, including general trading companies and consulting firms. For example, the Internet-related business is drawing a large number of new entriesparticipants who vie with Group companies in the development of new business activities.
40

If the Group is unable to suitably address client needs in these new business segments, from either a service or cost perspective, or if the presence of new entries suddenly alters business practices in the advertising industry, consolidated financial results could be adversely affected. Risk Related to Advertisers and Media Companies Dentsu has formed business ties with major advertisers in Japan and enjoys stable, long-term relationships with most of its current client base. Net sales to the Companys top 10 clients, in terms of billing amounts, represented about 20% of total non-consolidated net sales in fiscal 2008. Dentsu has established a solid foundation for business development through the operations and sales activities of mass media companies. This underpins the Companys ability to coordinate issues with advertisers and media companies and facilitate transactions. However, if the Company is unable to provide services that match the needs of existing or new advertisers or media companies, business relationships may be ended, accounts may shrink and the terms of business may change. This could adversely affect the fiscal results of the Group. In recent years, advertisers have become increasingly keen to consolidate their media service activities with one advertising agency to boost advertising efficiency and reduce costs. As a result, the profitability of advertising in the mass media categories is declining. If this trend persists, it could have a negative impact on consolidated financial results. Risk Related to Efforts to Reinforce Domestic Service Capabilities Risk related to the development of systems and databases Members of the Dentsu Group are involved in research and development on databases and computer systems that verify the effectiveness of advertisers activities and marketing budgets. Through these efforts, management seeks to bring latent demand to the surface and raise the Groups share of the domestic advertising market. However, it is unclear when the results of these efforts will be marketable and put into practical use, and if that time comes, the Groups R&D activities

may not produce the desired services, especially if the needs of advertisers have changed significantly or technological difficulties preclude widespread use. Risk related to investments in media and Internet advertising businesses To reinforce its position in the media markets, the Dentsu Group has stressed investments in the four traditional mass media, OOH media (billboard, transit and other OOH media) and satellite broadcasting media (broadcast and communication satellite), as well as in related research and business development programs. However, if demand for media advertising becomes stagnant or competition in the media advertising market intensifies, profits and business results might not be commensurate with investments in R&D and commercialization. In the Internet advertising domain, members of the Group actively invest in alliances with leading, dedicated agencies or in specialized companies and technologies. These investments help the Group cope with a diversifying array of advertising methods and an expanding range of advertisers, especially for cross-media campaign proposalswhich effectively mix several media and ad expressions into an approach that matches consumer behaviorand for search engine advertising, which is Internet advertising to display a keyword for which the right has been previously purchased by the advertiser, every time the search is hit via a search engine. However, if the Groups responses fail to adequately address rapid progress in technologies and services associated with the Internet advertising domain, the business results achieved might not be as high as expected at the time of investment. Risk related to e-solution development As part of its business diversification program, the Dentsu Group strives to expand the Groups presence in e-solution businesses, particularly customer relationship management (CRM), e-marketing and system design services. However, if demand for these services falls short of expectations, if the Group is unable to adequately meet clients orders, or if the Group loses its competitive edge over other solution providers, the Groups efforts may not yield the anticipated results.

Risk related to expansion of the promotion business The importance of promotional activities has been rising for advertisers, and the market is expanding. Taking advantage of this opportunity, the Dentsu Group established several specialized companies in promotion-related fields, including over-the-counter marketing, flyer production, direct business and client access, to expand its presence in the promotion business. However, if demand for these services falls short of expectations, or if the Group is unable to maintain competitiveness against other solution providers, the Groups investments might not expand business as planned. Risk Related to Content Business The Group actively invests in the acquisition of rights to, and in the production of, films, television programs, sporting events and music, and generates profits from the production, distribution, sale and licensing of films and other content as well as from the sale of sponsorships, broadcasting rights, films and content-related advertising. However, planning may extend over several fiscal years and require a considerable financial commitment. In addition, media channels that produce content have been diversifying in recent years. Moreover, the success of the Groups content business depends on general public reaction, which can be difficult to predict. Consequently, the Group may not realize expected investment returns, and the Groups financial results may be negatively affected by the results. Risk Related to Global Businesses Risk related to expansion of overseas businesses The Group conducts business activities outside Japan through its own network and through alliances with other companies. In fiscal 2008, sales in markets outside Japan accounted for approximately 8.7% of consolidated net sales. Management recognizes that building a global business portfolio is essential to the Groups future growth and is thus working to expand operations in overseas markets. Concerted efforts are directed toward localization of human resources and planning systems to increase earnings and sharpen the Groups competitive edge. However, the development of a stronger overseas presence may require
41

considerable financial investment, and competition among advertising companies is stiff. Therefore, if the Groups overseas businesses fail to progress as planned or are completely unsuccessful, consolidated financial results might be adversely affected. The BRICs and Asian countries, where local advertising markets have shown remarkable growth, are the geographical targets of the Groups efforts to expand overseas operations through its original network. However, these markets remain underdeveloped in terms of the advertising business. If political and economic conditions, legal restrictions, business practices and other factors in these regions do not develop as predicted, the Groups financial results might be adversely affected. Risk related to capital and business alliance with Publicis Groupe At present, Dentsu holds an equity stake in Publicis Groupe that underpins a business alliance emphasizing advertising services. However, this business and capital alliance may not deliver the results initially anticipated at the time of investment. Also, because Dentsu is a minority shareholder in Publicis Groupe, with approximately 15% of voting rights, the Companys ability to influence management is limited. Consequently, the business direction and strategies of Publicis Groupe may not always follow a path favorable to the Dentsu Group. Moreover, if the price of shares in Publicis Groupe were to decline sharply, Dentsu would be required to write down the value of the investment. Risk Related to Maintaining and Developing Human Resources The growth potential and competitive edge of the Dentsu Group are highly dependent upon attracting, keeping and developing excellent human resources. Therefore, companies under the Group umbrella strive to bring in the necessary talent by hiring a stable number of new graduates and by recruiting mid-career professionals with expertise and experience that will make an immediate impact. Then, training opportunities are offered to individuals according to position and ability to enhance inherent capabilities. These efforts could be sidetracked for all sorts of reasons, making it difficult to attract exceptional people or keep them within the Group. If this were to
42

occur, the Groups growth potential and its competitive edge might be adversely affected. Risk Related to Legal or Regulatory Changes Advertising companies in Japan, including those under the Dentsu Group umbrella, are subject to a number of laws and regulations, including laws to prevent delays in payments to subcontractors and to protect personal information and regulations applicable only to advertising companies. At the current time, management is not concerned that any of these laws and regulations will adversely impact the Groups business. However, consolidated financial results could be adversely affected if existing laws or regulations governing the advertising activities of advertisers or the format or content of advertisements are strengthened, if new laws or regulations are introduced, or if existing laws and regulations are reinterpreted. In the course of business, members of the Group handle consumer and advertiser information. The Dentsu Groups information security system is certified to international standards, and the utmost care is given to safeguarding information entrusted to the Company and the Group. However, if in the unlikely event the system fails and leads to an incident, such as an information leak, the Groups credibility could be severely tarnished. This could adversely affect the Groups financial results. Risk of Litigation As of March 31, 2009, no company under the Dentsu Group umbrella was subject to any litigation that could have a significant impact on financial results. However, the Company and members of the Group could become involved in litigation, directly or indirectly, through claims filed by clients, organizations, consumers and owners of intellectual property rights related to the content or creative aspect of advertisements produced during the course of business.

57

Data Section

Contents 45Consolidated Balance Sheets 47Consolidated Statements of Operations 48Consolidated Statements of Changes in Equity 49Consolidated Statements of Cash Flows 50Notes to Consolidated Financial Statements 79Independent Auditors Report 81Non-Consolidated Financial Summary 85Market Data 89History 90Subsidiaries and Affiliates 91Board of Directors, Corporate Auditors and Executive Officers 92Information for Shareholders

44

Consolidated Balance Sheets

Dentsu Inc. and Consolidated Subsidiaries March 31, 2009 and 2008

Millions of Yen

Thousands of U.S. Dollars (Note 1)

2008 2009

ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 6) Time deposits over three months Receivables: Trade notes Trade accounts Other Marketable securities (Note 3) Inventories (Note 4) Advance payment Deferred tax assets (Note 11) Prepaid expenses and other current assets Allowance for doubtful accounts Total current assets

2009

57,271 1,146 14,257 413,438 5,152 1,179 14,464 27,599 10,481 4,672 (3,345) 546,317

70,252 1,325 18,996 483,794 6,224 321 22,768 24,590 13,146 4,452 (4,871) 641,002

583,030 11,667 145,145 4,208,886 52,456 12,004 147,253 280,966 106,698 47,570 (34,060) 5,561,617

PROPERTY, PLANT AND EQUIPMENT (Notes 5 and 6): Land Buildings and structures Other Total Accumulated depreciation Net property, plant and equipment

160,803 153,678 27,941 342,422 (89,783) 252,639

158,868 153,592 21,328 333,789 (80,751) 253,038

1,637,007 1,564,478 284,444 3,485,930 (914,016) 2,571,914

INVESTMENTS AND OTHER ASSETS: Investment securities (Notes 3 and 6) Investments in unconsolidated subsidiaries and affiliated companies Goodwill Intangible assets Deferred tax assets (Note 11) Other assets Allowance for doubtful accounts Total investments and other assets TOTAL
See notes to consolidated financial statements.

67,233 108,850 20,658 26,360 35,466 36,129 (1,112) 293,586 1,092,543

85,455 166,376 17,477 24,305 29,367 35,981 (1,093) 357,871 1,251,912

684,451 1,108,116 210,312 268,351 361,060 367,808 (11,328) 2,988,771 $11,122,303

45

Millions of Yen

Thousands of U.S. Dollars (Note 1)

2008 2009

LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term borrowings (Note 6) Current portion of long-term debt (Notes 6 and 14) Payables: Trade notes Trade accounts (Note 6) Other Income taxes payable Accrued expenses Other current liabilities Total current liabilities LONG-TERM LIABILITIES: Long-term debt (Notes 6 and 14) Accrued pension and severance costs (Note 7) Deferred tax liabilities (Note 11) Deferred tax liabilities on land revaluation difference (Notes 2.i and 11) Other long-term liabilities Total long-term liabilities COMMITMENTS AND CONTINGENT LIABILITIES (Notes 14, 16 and 17) EQUITY (Note 8): Common stock, authorized, 1,100,000,000 shares; issued, 278,184,000 shares in 2009 and 2,781,840 shares in 2008 Capital surplus Stock acquisition rights Retained earnings Unrealized (loss) gain on available-for-sale securities Deferred gain (loss) on derivatives under hedge accounting Land revaluation difference (Note 2.i) Foreign currency translation adjustments Treasury stock at cost, 29,960,751.00 shares in 2009 and 36,020.19 shares in 2008 Total Minority interests Total equity TOTAL

2009

18,625 6,989 38,599 328,822 8,718 5,602 21,592 21,124 450,075

10,289 5,134 53,120 377,588 10,196 13,271 30,467 27,434 527,504

189,614 71,153 392,952 3,347,475 88,751 57,032 219,819 215,051 4,581,851

118,482 30,674 376 10,293 9,493 169,318

81,324 31,559 571 10,298 9,792 133,547

1,206,169 312,267 3,827 104,790 96,643 1,723,699

58,967 61,583 0 429,615 (2,440) 126 (7,187) (20,730) (67,367) 452,568 20,581 473,149 1,092,543

58,967 61,586 0 460,444 4,339 (559) (7,179) (3,550) (6,754) 567,293 23,567 590,861 1,251,912

600,296 626,936 0 4,373,566 (24,839) 1,292 (73,166) (211,042) (685,814) 4,607,228 209,523 4,816,752 $11,122,303

46

Consolidated Statements of Operations

Dentsu Inc. and Consolidated Subsidiaries Years Ended March 31, 2009 and 2008

Millions of Yen
2009 2008

Thousands of U.S. Dollars (Note 1)

2009

NET SALES COST OF SALES Gross profit SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Operating income OTHER INCOME (EXPENSES): Interest and dividend income Interest expense Foreign exchange gain (loss) net Equity in earnings of affiliated companies Loss on investments in partnership Gain on sales of investment securities Impairment loss Loss on valuation of investment securities Other net (Note 10) Other income (expenses) net INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS INCOME TAXES (Note 11): Current Deferred Total income taxes MINORITY INTERESTS IN NET INCOME NET INCOME (LOSS)

1,887,170 1,572,696 314,474 271,290 43,184

2,057,554 1,712,332 345,222 289,095 56,126

$19,211,753 16,010,343 3,201,410 2,761,784 439,625

2,995 (2,521) 598 8,970 (875) 864 (1,405) (51,116) (5,666) (48,156) (4,972)

3,382 (2,542) (81) 8,499 1,903 (72) (866) (2,738) 7,484 63,610

30,499 (25,673) 6,095 91,318 (8,908) 8,797 (14,305) (520,378) (57,690) (490,245) (50,620)

14,489 177 14,667 812 (20,453)

Yen
2009

25,140 496 25,637 1,726 36,246

147,510 1,811 149,322 8,274 $ (208,217)

U.S. Dollars

2008

2009

PER SHARE OF COMMON STOCK (Notes 2.r, 8 and 18): Basic net income (loss) Diluted net income Cash dividends applicable to the year
See notes to consolidated financial statements.

(79.61) 35.00

132.03 128.05 35.00

(0.81) 0.36

47

Consolidated Statements of Changes in Equity

Dentsu Inc. and Consolidated Subsidiaries Years Ended March 31, 2009 and 2008

Millions of Yen Outstanding Number of Shares of Common Stock Unrealized (Loss) Gain on Retained Available-for-sale Earnings Securities Deferred Gain (Loss) on Land Derivatives under Hedge Revaluation Accounting Difference Foreign Currency Translation Adjustments

Common Stock

Stock Capital Acquisition Rights Surplus

Treasury Stock

Total

Minority Interests

Total Equity

BALANCE, APRIL 1, 2007 2,743,783.31 58,967 61,474 Net income Cash dividends, 3,250 per share Change of scope of equity method Repurchase of treasury stock (55.31) Disposal of treasury stock 2,091.81 111 Other changes in the year BALANCE, MARCH 31, 2008 2,745,819.81 58,967 61,586 Adjustment of retained earnings due to an adoption of PITF No.18 (Note 2.s) 245,741,944.14 Stock split (Note 8) Net loss Cash dividends, 3,750 per share Change of scope of equity method Reversal of revaluation reserve for land (264,677.57) Repurchase of treasury stock 162.62 (2) Disposal of treasury stock Other changes in the year 248,223,249.00 58,967 61,583 BALANCE, MARCH 31, 2009

0 0 (0) 0

433,383 15,336 36,246 (8,920) (410) 145 (10,997) 460,444 4,339

818 (1,377) (559)

(7,179) (7,179)

(909) (2,641) (3,550)

(7,130) (17) 393 (6,754)

554,760 36,246 (8,920) (410) (17) 505 (14,870) 567,293

22,285 1,281 23,567

577,046 36,246 (8,920) (410) (17) 505 (13,588) 590,861

(728) (20,453) (9,769) 114 7 (6,779) 686 429,615 (2,440) 126

(728) (728) (20,453) (20,453) (9,769) (9,769) 114 114 (7) (60,650) (60,650) (60,650) 34 34 37 (17,180) (23,273) (2,986) (26,259) (7,187) (20,730) (67,367) 452,568 20,581 473,149

Thousands of U.S. Dollars (Note 1) Unrealized (Loss) Gain on Retained Available-for-sale Securities Earnings Deferred Gain (Loss) on Land Derivatives under Hedge Revaluation Accounting Difference Foreign Currency Translation Adjustments

Common Stock

Stock Capital Acquisition Rights Surplus

Treasury Stock

Total

Minority Interests

Total Equity

BALANCE, MARCH 31, 2008 Adjustment of retained earnings due to an adoption of PITF No.18 (Note 2.s) Net loss Cash dividends, $38.18 per share Change of scope of equity method Reversal of revaluation reserve for land Repurchase of treasury stock Disposal of treasury stock Other changes in the year BALANCE, MARCH 31, 2009
See notes to consolidated financial statements.

$600,296 $626,963 (27) $600,296 $626,936

$ 2

$4,687,413

$ 44,172

$(5,696) $(73,089) $ (36,142) $ (68,765) $5,775,155 $239,925 $6,015,080 (7,419) (7,419) (208,217) (208,217) (99,456) (99,456) 1,169 1,169 (77) (617,430) (617,430) (617,430) 381 354 354 (236,925) (30,401) (267,327) 6,989 (174,899) $1,292 $(73,166) $(211,042) $(685,814) $4,607,228 $209,523 $4,816,752

(7,419) (208,217) (99,456) 1,169 77 (2) (69,012) $ 0 $4,373,566 $(24,839)

48

Consolidated Statements of Cash Flows

Dentsu Inc. and Consolidated Subsidiaries Years Ended March 31, 2009 and 2008 Thousands of U.S. Dollars (Note 1) 2008 2009

Millions of Yen 2009

OPERATING ACTIVITIES: Income(loss) before income taxes and minority interests Adjustments for: Income taxes paid Depreciation and amortization Impairment loss Amortization of goodwill net Foreign exchange gain net Write-down of investment securities Equity in earnings of affiliated companies Changes in assets and liabilities, net of effects from newly consolidated subsidiaries: Decrease in notes and accounts receivable trade Decrease in inventories (Decrease) increase in notes and accounts payable trade (Decrease) increase in allowance for doubtful accounts Decrease in liability for retirement benefits Increase in other current assets Decrease in other current liabilities Other net Total adjustments Net cash provided by operating activities INVESTING ACTIVITIES: Payments for purchases of marketable securities Proceeds from sales of marketable securities Payments for purchases of property, plant and equipment Proceeds from sales of property, plant and equipment Payments for purchases of investment securities Proceeds from sales of investment securities Payments for purchases of software Payments for loans Proceeds from collection of loans Payments for the purchases of consolidated subsidiaries Payments for the purchases of newly consolidated subsidiaries (Note 12.a) Payments for sales of investments in subsidiaries resulting in change in scope of consolidation (Note 12.b) Proceeds from sales of subsidiaries excluded from consolidation (Note 12.b) Other net Net cash used in investing activities FINANCING ACTIVITIES: Increase (decrease) in short-term borrowings net Proceeds from long-term debt Repayments of long-term debt Proceeds from issuance of subsidiaries stock to minority shareholders Payments for repurchase of treasury stock Dividends paid to shareholders Dividends paid to minority shareholders Other net Net cash used in financing activities FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR INCREASE IN CASH AND CASH EQUIVALENTS RESULTING FROM MERGER CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.

(4,972) (22,022) 18,001 1,405 3,454 (35) 51,116 (8,970) 63,992 7,190 (51,902) (688) (762) (3,562) (11,740) 1,855 47,331 42,359

63,610 (30,213) 16,000 72 4,238 (294) 866 (8,499) 12,423 3,873 5,836 783 (7,106) (2,375) (6,917) 3,710 (7,603) 56,007

$ (50,620) (224,194) 183,256 14,305 35,165 (361) 520,378 (91,318) 651,454 73,203 (528,382) (7,009) (7,759) (36,266) (119,518) 18,893 481,845 431,225

(997) 1,200 (4,974) 193 (4,248) 9,662 (7,588) (4,116) 3,826 (10,090) (5,707) (132) 629 80 (22,263)

(1,101) 3,128 (4,604) 74 (22,769) 14,858 (7,511) (2,197) 1,584 (689) (1,409) (8) 2,577 (18,069)

(10,156) 12,217 (50,638) 1,971 (43,255) 98,368 (77,252) (41,904) 38,958 (102,726) (58,104) (1,352) 6,406 818 (226,650)

9,883 40,000 (7,349) 710 (60,650) (9,769) (601) 28 (27,748) (5,519) (13,172) 70,252 190 57,271

(3,846) 26 (17,861) 140 (17) (8,920) (626) 404 (30,701) 168 7,405 62,015 832 70,252

100,620 407,207 (74,822) 7,231 (617,430) (99,456) (6,122) 288 (282,485) (56,184) (134,094) 715,185 1,939 $ 583,030

49

Notes to Consolidated Financial Statements

Dentsu Inc. and Consolidated Subsidiaries Years Ended March 31, 2009 and 2008

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards. Japanese yen figures less than a million yen are rounded down to the nearest million yen, except for per share data. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2008 financial statements to conform to the classifications used in 2009. The consolidated financial statements are stated in Japanese yen, the currency of the country in which Dentsu Inc. (the Company) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of 98.23 to $1, the rate of exchange at March 31, 2009. Such translations should not be construed as representation that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Consolidation The consolidated financial statements at March 31, 2009 include the accounts of the Company and its 126 (129 in 2008) significant subsidiaries (together, the Group). Investments in 29 (31 in 2008) affiliated companies are accounted for by the equity method. Under the control or influence concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are accounted for by the equity method. The differences of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date of acquisition are amortized over an estimated effective period, from 3 to 20 years, or if immaterial, are charged to income when incurred. The amortization of goodwill for the years ended March 31, 2009 and 2008 was 3,454 million ($35,165 thousand) and 4,238 million, respectively. All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated. b. Cash Equivalents Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignificant risk of changes in value. Cash equivalents include time deposits, certificate of deposits, commercial paper and bond funds, all of which mature or become due within three months of the date of acquisition. c. Inventories Inventories are stated at cost substantially determined by the specific identification method. In July 2006, the Accounting Standards Board of Japan (the ASBJ) issued ASBJ Statement No.9, Accounting Standard for Measurement of Inventories. This standard requires that inventories held for sale in the ordinary course of business be measured at the lower of cost or net selling value, which is defined as the selling price less additional estimated manufacturing costs and estimated direct selling expenses. The replacement cost may be used in place of the net selling value, if appropriate. The standard was effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted. The Group applied this new accounting standard for measurement of inventories effective April 1, 2008. The effect of this change on the financial statements and the segment information for the consolidated fiscal year was immaterial.

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d. Marketable and Investment Securities Marketable and investment securities are classified and accounted for, depending on managements intent, as either (1) held-to-maturity debt securities, which management has the positive intent and ability to hold to maturity are reported at amortized cost or (2) available-for-sale securities, which are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. Non-marketable available-for-sale securities are stated at cost determined mainly by the moving-average method. For other than temporary declines in fair value, investment securities are reduced to net realizable value by a charge to income. (Additional information) Of its investment securities, the Company holds obligations remboursable en actions (ORA) in Publicis Groupe S.A., which are redeemable only for stock. With regard to the ORA, the Company booked an unrealized loss on available-for-sale securities using the balance sheet amount, which is based not on market price but rather a reasonably calculated price determined by a third party independent from the company producing the consolidated financial statements. This is because actual trading of ORA is traded was extremely limited in fiscal 2009. The reasonably calculated price was determined according to a method which rides on the market price of common stock, and used a ratio representing the correlation between the market value of common stock and the ORA in Publicis Groupe S.A. as the value-determining variables. The balance sheet amount for the ORA is 10,924 million ($111,215 thousand). e. Allowance for Doubtful Accounts The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the past credit loss experience and an evaluation of potential losses in the receivables outstanding. f. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and its consolidated domestic subsidiaries is computed substantially by the declining-balance method based on the estimated useful lives of the assets, while the straight-line method is applied to buildings acquired after April 1, 1998, and most property, plant and equipment of consolidated foreign subsidiaries. The range of useful lives is principally from 3 to 65 years for buildings and structures, and from 2 to 20 years for furniture and fixtures. The useful lives for lease assets are the terms of the respective leases. g. Long-Lived Assets The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition. h. Intangible Assets Intangible assets are carried at cost less accumulated amortization, which is calculated by the straight-line method. Software for sale to the market is amortized in proportion to the actual sales of the software during the current year to the estimated total sales over the estimated salable years of the software or at the amount to be amortized by the straight-line method over the estimated salable years, within 3 years. Software for internal use is amortized by the straight-line method over the estimated useful lives, principally over 5 years. i. Land Revaluation Under the Law of Land Revaluation, the Company elected a one-time revaluation of its own-use land to a value based on real estate appraisal information at March 31, 2001. The resulting increase in land revaluation difference represents unrealized appreciation of land and is stated, net of applicable taxes, as a component of equity. There was no effect on the consolidated statements of operations. Continuous readjustment is not permitted unless the land value subsequently declines significantly such that the amount of the decline in value should be removed from the land revaluation difference account and related deferred tax liabilities. j. Allowance for Losses on Investment Securities and Investments in Unconsolidated Subsidiaries The allowance for losses on investment securities and investments in unconsolidated subsidiaries is stated in amounts considered to be appropriate based on the estimated losses on non-marketable investment securities to be incurred in future. The Group accounted for this allowance since 2005 in terms of financial soundness and future uncertainties.

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k. Accrued Pension and Severance Costs The Company and certain consolidated subsidiaries have defined benefit pension plans for employees. Some consolidated subsidiaries have defined contribution pension plans. The Group accounts for the liability for employees retirement benefits based on the projected benefit obligations and plan assets at the balance sheet date. Retirement benefits for directors and corporate auditors are provided at the amount which would be required if all directors and corporate auditors retired at the balance sheet date. l. Stock Options The ASBJ Statement No.8, Accounting Standard for Stock Options and related guidance are applicable to stock options granted on and after May 1, 2006. This standard requires companies to recognize compensation expense for employee stock options based on the fair value at the date of grant and over the vesting period as consideration for receiving goods or services. The standard also requires companies to account for stock options granted to non-employees based on the fair value of either the stock option or the goods or services received. In the balance sheet, the stock option is presented as a stock acquisition right as a separate component of equity until exercised. The standard allows unlisted companies to measure options at their intrinsic value if they cannot reliably estimate fair value. The Group has applied the accounting standard for stock options to those granted on and after May 1, 2006. m. Leases In March 2007, the ASBJ issued ASBJ Statement No.13, Accounting Standard for Lease Transactions, which revised the previous accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions is effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted for fiscal years beginning on or after April 1, 2007. Under the previous accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee were to be capitalized. However, other finance leases were permitted to be accounted for as operating lease transactions if certain as if capitalized information is disclosed in the note to the lessees financial statements. The revised accounting standard requires that all finance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the revised accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased property to the lessee to be measured at the obligations under finance leases less interest expense at the transition date and recorded as acquisition cost of lease assets. The Group applied the revised accounting standard effective April 1, 2008. In addition, the Company accounted for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as acquisition cost of lease assets measured at the obligations under finance leases less interest expense at the transition date. The effect of this change on the financial statements and the segment information for the consolidated fiscal year was immaterial. All other leases are accounted for as operating leases. n. Income Taxes The provision for income taxes is computed based on the pretax income included in the consolidated statements of operations. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences. o. Foreign Currency Transactions All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statements of operations to the extent that they are not hedged by forward exchange contracts. p. Foreign Currency Financial Statements The balance sheet accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical rate. Differences arising from such translation were shown as Foreign currency translation adjustments in a separate component of equity. Revenue and expense accounts of consolidated foreign subsidiaries are translated into yen at the average exchange rate. q. Derivatives and Hedging Activities The Group uses derivative financial instruments, such as foreign exchange forward contracts, and interest swap transactions to manage its exposures to fluctuations in foreign currency exchange risks and interest rate risk. The Group does not enter into derivatives for trading or speculative purposes.

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Derivative financial instruments are classified and accounted for as follows: (a) all derivatives (except for those described below as (b)) are recognized as either assets or liabilities and measured at fair value, with gains and losses recognized in the consolidated statements of operations and (b) if derivatives qualify for hedge accounting, because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses are deferred until maturity of the hedged transactions. The foreign exchange forward contracts utilized by the Company and certain consolidated subsidiaries are measured at market value at the balance sheet date and the unrealized gains or losses are deferred until the underlying transactions or settlements are completed. Some consolidated subsidiaries translate receivables and payables denominated in foreign currencies at the contracted rate if the forward contracts qualify for hedge accounting. The interest rate swaps which qualify for hedge accounting and meet specific matching criteria are not remeasured at market value but the differential paid or received under the swap agreements are recognized and included in interest expenses or income. r. Per Share Information Basic net income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weightedaverage number of common shares outstanding for the period. Diluted net income per share reflects the potential dilution that could occur if securities were exercised or converted into common stock. Diluted net income per share of common stock assumes full conversion of the outstanding convertible bonds at the beginning of the year (or at the time of issuance) with an applicable adjustment for related interest expense, net of tax and full or partial exercise of outstanding warrants. Cash dividends per share presented in the accompanying consolidated statements of operations are dividends applicable to the respective years including dividends to be paid after the end of the year. s. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements In May 2006, the ASBJ issued ASBJ Practical Issues Task Force (PITF) No.18, Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements. PITF No.18 prescribes: (1) the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unified for the preparation of the consolidated financial statements, (2) financial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States of America tentatively may be used for the consolidation process, (3) however, the following items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; 5) recording the prior years effects of changes in accounting policies in the income statement where retrospective adjustments to financial statements have been incorporated; and 6) exclusion of minority interests from net income, if contained. PITF No.18 was effective for fiscal years beginning on or after April 1, 2008 with early adoption permitted. The effect of this change on the financial statements and the segment information for the consolidated fiscal year was immaterial. t. New Accounting Pronouncements Business Combinations On December 26, 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No.21, Accounting Standard for Business Combinations. Major accounting changes under the revised accounting standard are as follows: (1) The current accounting standard for business combinations allows companies to apply the pooling of interests method of accounting when certain specific criteria are met such that the business combination is essentially regarded as a uniting-of-interests. The revised standard requires to account for such business combination by the purchase method and the pooling of interests method of accounting is no longer allowed. (2) The current accounting standard accounts for the research and development costs to be charged to income as incurred. Under the revised standard, an in-process research and development (IPR&D) acquired by the business combination is capitalized as an intangible asset. (3) The current accounting standard accounts for a bargain purchase gain (negative goodwill) to be systematically amortized within 20 years. Under the revised standard, the acquirer recognizes a bargain purchase gain in profit or loss on the acquisition date after reassessing whether it has correctly identified all of the assets acquired and all of the liabilities assumed with a review of such procedures used. This standard is applicable to business combinations undertaken on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or after April 1, 2009.

53

Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method The current accounting standard requires to unify accounting policies within the consolidation group. However, the current guidance allows to apply the equity method for the financial statements of its foreign associated company which have been prepared in accordance with generally accepted accounting principles in their respective jurisdictions without unification of accounting policies. On December 26, 2008, the ASBJ issued ASBJ Statement No.16 (Revised 2008), Revised Accounting Standard for Equity Method of Accounting for Investments. The new standard requires adjustments to be made to conform the associates accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associates financial statements are used in applying the equity method unless it is impractible to determine adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; 5) recording the prior years effects of changes in accounting policies in the income statement where retrospective adjustments to the financial statements have been incorporated; and 6) exclusion of minority interests from net income, if contained. This standard is applicable to equity method of accounting for investments effective on or after April 1, 2010 with early adoption permitted for fiscal years beginning on or after April 1, 2009.

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3. MARKETABLE AND INVESTMENT SECURITIES Marketable and investment securities at March 31, 2009 and 2008 consisted of the following:
Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Current: Debt securities Other Total Non-current: Equity securities Debt securities Other Total

15 1,164 1,179 64,226 1,909 1,097 67,233

149 171 321 82,230 1,986 1,238 85,455

$ 152 11,851 $ 12,004 $653,838 19,444 11,168 $684,451

The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2009 and 2008 were as follows:
Millions of Yen
2009 March 31 Cost Unrealized Gains Unrealized Loss Fair Value

Securities classified as: Available-for-sale: Equity securities Debt securities Other

27,696 2,014 1,000

3,893 0 6
Millions of Yen
2008

(6,148) (97)

25,441 1,918 1,006

March 31

Cost

Unrealized Gains

Unrealized Loss

Fair Value

Securities classified as: Available-for-sale: Equity securities Debt securities Other

27,630 2,114 1,000

9,436 0

(1,538) (36)

35,527 2,078 1,000

Thousands of U.S. Dollars

2009 March 31 Cost Unrealized Gains Unrealized Loss Fair Value

Securities classified as: Available-for-sale: Equity securities Debt securities Other

$281,959 20,512 10,180

$39,635 0 63

$(62,591) (987)

$259,003 19,525 10,243

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Available-for-sale securities and held-to-maturity securities whose fair value is not readily determinable at March 31, 2009 and 2008 were mainly as follows:
Thousands of U.S. Dollars
2008 Carrying Amount 2009

Millions of Yen
2009

Available-for-sale: Equity securities Other Total Held-to-maturity: Corporate bonds Total

38,784 1,006 39,791

46,702 102 46,805

$394,834 10,249 $405,083

50 50

Proceeds, gross realized gains and losses on sales of available-for-sale securities for the years ended March 31, 2009 and 2008 were as follows:
Thousands of U.S. Dollars
2008 2009

Millions of Yen
2009

Proceeds Gross realized gains Gross realized losses

9,003 856 215

2,640 1,375 169

$91,652 8,715 2,194

The carrying values of debt securities by contractual maturities for securities classified as available-for-sale and held-to-maturity at March 31, 2009 were as follows:
Thousands of U.S. Dollars

Millions of Yen

Due in one year or less Due after one year through five years Due after five years through ten years Total 4. INVENTORIES Inventories at March 31, 2009 and 2008 consisted of the following:

1,041 1 5 1,048

$10,601 20 50 $10,672

Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Merchandise and finished goods Works Work-in-process Raw materials and supplies Total

34 1,269 12,953 207 14,464

706 1,055 20,785 221 22,768

$ 348 12,928 131,865 2,111 $147,253

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5. LONG-LIVED ASSETS At March 31, 2009, the Group reviewed its long-lived assets for impairment, and as a result, recognized an impairment loss of 1,405 million ($14,305 thousand) as other expense for assets for business property. Those assets were considered to have no recovery value. At March 31, 2008, the Group reviewed its long-lived assets for impairment, and as a result recognized an impairment loss of 72 million as other expense for business property. The recoverable amount of those assets was measured at their net selling price determined by road rates. 6. SHORT-TERM BORROWINGS AND LONG-TERM DEBT Short-term borrowings consisted of loans from banks and other financial institutions of 3,625 million ($36,911 thousand) at March 31, 2009, 10,289 million at March 31, 2008 and commercial paper of 15,000 million ($152,702 thousand) at March 31, 2009, Nil at March 31, 2008. The weighted-average interest rates applicable to the borrowings at March 31, 2009 and 2008 were 0.84% (the loans from banks and other financial institutions was 3.36% and the commercial paper was 0.23%) and 5.09%, respectively. Long-term debt at March 31, 2009 and 2008 consisted of the following:
2009

Millions of Yen
2008

Thousands of U.S. Dollars

2009

Loans from banks and other financial institutions, maturing in installments through 2022 bearing weighted-average interest of 1.78% (2009) and 2.04% (2008) Collateralized Unsecured Lease obligations Total Less current portion Long-term debt, less current portion

12 121,301 4,157 125,471 (6,989) 118,482

29 86,429 86,459 (5,134) 81,324

131 1,234,872 42,319 1,277,323 (71,153) $1,206,169

Annual maturities of long-term debt, excluding finance leases (see Note 14) at March 31, 2009, were as follows:
Year Ending March 31 Millions of Yen Thousands of U.S. Dollars

2010 2011 2012 2013 2014 2015 and thereafter Total

5,118 18,620 18,613 24,358 25,856 28,747 121,314

52,108 189,555 189,490 247,970 263,226 292,652 $1,235,004

The carrying amounts of assets pledged as collateral for long-term debt of 12 million ($131 thousand) and trade accounts payable of 898 million ($9,149 thousand) at March 31, 2009 were as follows: Thousands of
Millions of Yen U.S. Dollars

Vehicles net of accumulated depreciation Cash and cash equivalents Investment securities Total

13 85 1 100

$ 132 873 20 $1,026

As is customary in Japan, both short-term and long-term bank loans are made under general agreements which provide that security and guarantees for present and future indebtedness will be given upon request of the bank, and that the bank shall have the right to offset cash deposits against obligations that have become due or, in the event of default, against all obligations due the bank. At March 31, 2009, the Company is not in default of its obligations and none of the cash deposits with banks were offset against any recorded obligations.
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7. ACCRUED PENSION AND SEVERANCE COSTS The Company and certain consolidated subsidiaries have defined benefit pension plans covering substantially all employees after three years of service. Some consolidated subsidiaries have defined contribution pension plans. The Company and certain consolidated subsidiaries have offered an early retirement program to its employees. The program provides additional benefit payments for employees who elect early retirement benefit before the mandatory retirement age of 60. Related expenses for the years ended March 31, 2009 and 2008, which are recognized when the employees accept the offer and the amount can be reasonably estimated, were 106 million ($1,080 thousand) and 261 million, respectively. The liability for employees retirement benefits at March 31, 2009 and 2008 consisted of the following:
Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Projected benefit obligation Fair value of plan assets Unrecognized prior service benefits Unrecognized actuarial loss Net liability Prepaid pension cost The liability for employees retirement benefits

156,723 (89,250) 12,053 (58,039) 21,487 8,288 29,775

155,547 (114,552) 13,056 (31,284) 22,767 7,777 30,544

$1,595,473 (908,584) 122,709 (590,853) 218,745 84,377 $ 303,122

The components of net periodic benefit costs and relevant gains and losses for the years ended March 31, 2009 and 2008 were as follows:
Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Service cost Interest cost Expected return on plan assets Recognized actuarial loss Amortization of prior service benefits Contributions for defined contribution pension plans Net periodic benefit costs Expenses for early retirement program Total Assumptions used for the years ended March 31, 2009 and 2008 were set forth as follows:

7,205 3,026 (1,430) 2,182 (1,002) 683 10,664 106 10,770

7,309 2,965 (1,517) (128) (1,004) 597 8,221 261 8,483

$ 73,350 30,806 (14,557) 22,220 (10,204) 6,954 108,568 1,080 $109,649

2009

2008

Discount rate Expected rate of return on plan assets Recognition period of actuarial gain/loss Amortization period of prior service benefits

mainly 2.0% mainly 2.5% mainly 17 years mainly 17 years

2.0 to 2.5% mainly 2.5% 9.8 to 18 years 15 to 18 years

The liability for retirement benefits at March 31, 2009 and 2008 for directors and corporate auditors was 898 million ($9,145 thousand) and 1,015 million, respectively, which was included in the liability for retirement benefits on the consolidated balance sheets. The retirement benefits for directors and corporate auditors are paid subject to the approval of the shareholders.

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8. EQUITY Since May 1, 2006, Japanese companies have been subject to the Companies Act of Japan (the Companies Act), with various revisions that are, for the most part, applicable to events or transactions which occur on or after May 1, 2006 and for the fiscal years ending on or after May 1, 2006. The significant provisions in the Companies Act that affect financial and accounting matters are summarized below: a. Dividends Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) if the Company has prescribed so in its articles of incorporation. The company meets all the above criteria. The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain limitation and additional requirements. Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of incorporation of the Company so stipulate. The Companies Act also provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than 3 million. b. Increases/decreases and transfer of common stock, reserve and surplus The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders. c. Treasury stock and treasury stock acquisition rights The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by specific formula. Under the Companies Act, stock acquisition rights are presented as a separate component of equity. The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights. d. Stock split On January 4, 2009, the Company implemented a stock split at a ratio of 100 shares per share of common stock. As a result, the number of outstanding shares of common stock increased by 245,741,944.14 shares. The 2008 per share information has been adjusted to reflect the stock split that become effective on January 4, 2009.

59

9. STOCK OPTIONS a. The stock options outstanding at March 31, 2009 are as follows: DENTSU INC.
Stock Option Persons Granted Number of Options Granted Date of Grant Exercise Price Exercise Period

2003 Stock Option

1,138,000 shares 12 directors 104 employees 19 directors in subsidiaries

July 8, 2003

2,285

From July 8, 2005 to July 7, 2009

Note: As on January 4, 2009, the Company implemented a stock split at a ratio of 100 shares per share of common stock. Number of options granted and Exercise Price due to the exercise of a stock option are adjusted.

Cyber Communications INC.

Stock Option Persons Granted Number of Options Granted Date of Grant Exercise Price Exercise Period

2000 Stock Option 2001 Stock Option 2003 Stock Option

2004 Stock Option

2005 Stock Option

8 directors 34 employees 6 directors 94 employees 9 directors 2 auditors 10 employees 3 others 3 directors 3 executive officers 62 employees 2 others 3 directors 7 executive officers 116 employees 7 others

22,640 shares 2,752 shares 2,800 shares

July 8, 2000 July 25, 2001 July 30, 2003

27,500 211,595 60,500

From July 1, 2002 to June 26, 2010 From June 1, 2003 to June 26, 2011 From June 21, 2004 to June 20, 2013

3,400 shares

August 4, 2004

113,048

From June 29, 2005 to June 28, 2014

4,400 shares

September 21, 2005

242,005

From June 29, 2006 to June 28, 2015

Information Services International Dentsu INC.

Stock Option Persons Granted Number of Options Granted Date of Grant Exercise Price Exercise Period

2001 Stock Option 2002 Stock Option

9 directors 4 employees 10 directors 3 employees 6 others

100,000 shares 116,000 shares

September 6, 2001 November 20, 2002

5,843 1,700

From July 1, 2003 to June 28, 2011 From June 26, 2004 to June 25, 2012

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Criteria Communications INC.

Stock Option Persons Granted Number of Options Granted Date of Grant Exercise Price Exercise Period

2005 Stock Option

2005 Stock Option

2005 Stock Option 2005 Stock Option

2 directors 1 auditor 10 employees 34 others 2 directors 1 auditor 9 employees 1 other 1 affiliated company 3 directors 3 employees 21 others

6,050 shares

February 1, 2005

20,000

From listed day to January 31, 2010

2,000 shares

July 26, 2005

20,000

From listed day to June 24, 2010

22,500 shares 1,750 shares

January 31, 2006 March 28, 2006

20,000 20,000

From listed day to August 25, 2015 From listed day to August 25, 2010

Dentsu search & link INC.

Stock Option Persons Granted Number of Options Granted Date of Grant Exercise Price Exercise Period

2006 Stock Option

3 directors 31 employees 1 other

2,000 shares

August 23, 2006

44,000

From August 12, 2008 to August 11, 2016

Note: DENTSU e-LINK INC. and K.K. 24-7 Search merged on January 1, 2009, and its corporate name was changed to Dentsu search & link INC.

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b. The stock option activity is as follows: DENTSU INC.

For the year ended March 31, 2008 Non-vested 2001 Stock Option 2003 Stock Option

March 31, 2007 Outstanding Granted Canceled Vested March 31, 2008 Outstanding
Vested

March 31, 2007 Outstanding Vested Exercised Canceled March 31, 2008 Outstanding Exercise price Average stock price at grant date
For the year ended March 31, 2009 Non-vested

340,000 100,000 240,000 0 2,814 3,385

472,600 105,800 366,800 2,285 3,243

March 31, 2008 Outstanding Granted Canceled Vested March 31, 2009 Outstanding
Vested

March 31, 2008 Outstanding Vested Exercised Canceled March 31, 2009 Outstanding Exercise price Average stock price at grant date
Note: As on January 4, 2009, the Company implemented a stock split at a ratio of 100 shares per share of common stock. The number of stock options and price due to the exercise of a stock option are adjusted.

366,800 11,600 355,200 2,285 2,475

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Cyber Communications INC.

For the year ended March 31, 2008 Non-vested 2000 Stock Option 2001 Stock Option 2003 Stock Option 2004 Stock Option 2005 Stock Option

March 31, 2007 Outstanding Granted Canceled Vested March 31, 2008 Outstanding
Vested

March 31, 2007 Outstanding Vested Exercised Canceled March 31, 2008 Outstanding Exercise price Average stock price at grant date
For the year ended March 31, 2009 Non-vested

2,537 2,537 27,500

851 54 797 211,595

1,850 198 1,652 60,500 80,500

2,750 10 2,740 113,048

3,899 113 3,786 242,005

March 31, 2008 Outstanding Granted Canceled Vested March 31, 2009 Outstanding
Vested

March 31, 2008 Outstanding Vested Exercised Canceled March 31, 2009 Outstanding Exercise price Average stock price at grant date

2,537 2,537 27,500 42,180

797 797 211,595

1,652 1,652 60,500

2,740 50 2,690 113,048

3,786 103 3,683 242,005

63

Information Services International Dentsu INC.

For the year ended March 31, 2008 Non-vested 2001 Stock Option 2002 Stock Option

March 31, 2007 Outstanding Granted Canceled Vested March 31, 2008 Outstanding
Vested

March 31, 2007 Outstanding Vested Exercised Canceled March 31, 2008 Outstanding Exercise price Average stock price at grant date
For the year ended March 31, 2009 Non-vested

100,000 100,000 5,843

116,000 116,000 1,700

March 31, 2008 Outstanding Granted Canceled Vested March 31, 2009 Outstanding
Vested

March 31, 2008 Outstanding Vested Exercised Canceled March 31, 2009 Outstanding Exercise price Average stock price at grant date

100,000 50,000 50,000 5,843

116,000 56,000 60,000 1,700

64

Criteria Communications INC.

For the year ended March 31, 2008 Non-vested 2005 Stock Option 2005 Stock Option 2005 Stock Option 2005 Stock Option

March 31, 2007 Outstanding Granted Canceled Vested March 31, 2008 Outstanding
Vested

6,050 6,050

2,000 2,000

22,500 22,500

1,750 1,750

March 31, 2007 Outstanding Vested Exercised Canceled March 31, 2008 Outstanding Exercise price Average stock price at grant date
For the year ended March 31, 2009 Non-vested

20,000

20,000

20,000

20,000

March 31, 2008 Outstanding Granted Canceled Vested March 31, 2009 Outstanding
Vested

6,050 5,695 355

2,000 2,000

22,500 22,500

1,750 1,600 150

March 31, 2008 Outstanding Vested Exercised Canceled March 31, 2009 Outstanding Exercise price Average stock price at grant date

20,000

20,000

20,000

20,000

65

Dentsu search & link INC.

For the year ended March 31, 2008 Non-vested 2006 Stock Option

March 31, 2007 Outstanding Granted Canceled Vested March 31, 2008 Outstanding
Vested

2,000 2,000

March 31, 2007 Outstanding Vested Exercised Canceled March 31, 2008 Outstanding Exercise price Average stock price at grant date Fair value price at grant date
For the year ended March 31, 2009 Non-vested

44,000

March 31, 2008 Outstanding Granted Canceled Vested March 31, 2009 Outstanding
Vested

2,000 2,000

March 31, 2008 Outstanding Vested Exercised Canceled March 31, 2009 Outstanding Exercise price Average stock price at grant date Fair value price at grant date
Note: DENTSU e-LINK INC. and K.K. 24-7 Search merged on January 1, 2009, and their corporate name was changed to Dentsu search & link INC.

44,000

c. The assumptions used to measure fair value of the 2006 Stock Option: On August 11, 2006, DENTSU e-LINK INC., one of the subsidiaries granted stock options. As the company was a non-public company, the fair unit value of the stock options was measured at their intrinsic value. The valuation method for estimating the intrinsic value was based on the price calculated mainly using the discounted cash flow method.

66

10. OTHER INCOME (EXPENSES) Other income (expenses)net for the years ended March 31, 2009 and 2008 consisted of the following:
Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Expenses for early retirement program Amortization of goodwill Restructuring loss Other Other expenses net

(106) (1,568) (4,423) 431 (5,666)

(261) (2,183) (1,351) 1,057 (2,738)

$ (1,080) (15,970) (45,030) 4,390 $(57,690)

11. INCOME TAXES The Company and its domestic subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory tax rate of approximately 41.0% for the years ended March 31, 2009 and 2008. The tax effects of significant temporary differences and tax loss carryforwards which resulted in deferred tax assets and liabilities at March 31, 2009 and 2008 were as follows:
Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Deferred tax assets: Accrued pension and severance costs Accrued expenses Write-down of marketable and investment securities Tax loss carryforwards Inventories Other Less valuation allowance Total Deferred tax liabilities: Gain on contribution of securities to the employee retirement benefit trust Unrealized gain on available-for-sale securities Other Total Net deferred tax assets

41,296 6,870 8,915 4,805 1,730 11,547 (9,624) 65,541

41,001 9,696 5,412 5,595 1,344 13,286 (10,448) 65,889

$ 420,404 69,943 90,759 48,918 17,619 117,558 (97,977) $ 667,225

(18,943) (1,028) (19,972) 45,569

(18,943) (3,346) (1,664) (23,954) 41,934

$(192,846) (10,473) $(203,320) $ 463,905

67

The tax effects of land revaluation at March 31, 2009 were as follows:
Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Deferred tax assets on land revaluation Less valuation allowance Total Deferred tax liabilities on land revaluation Net deferred tax liabilities on land revaluation difference

9,019 (9,019) (10,293) (10,293)

9,019 (9,019) (10,298) (10,298)

$ 91,825 (91,825) (104,790) $(104,790)

A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying consolidated statements of operations for the years ended March 31, 2009 is as follows:
2009

Normal effective statutory tax rate Expenses not deductible for income tax purposes Tax-exempt dividends received Amortization of goodwill Equity in earnings of affiliated companies Other net Actual effective tax rate

(41.0)% 39.6 (8.2) 375.4 (74.0) 3.2 295.0 %

Note: The presentation for the normal effective statutory tax rate is negative because of loss before income taxes and minority interests in the fiscal year ended March 31, 2009. As the difference between the normal effective statutory tax rate and actual effective tax rate was not considered significant for the year ended March 31, 2008, a reconciliation between the normal effective statutory tax rate and actual effective tax rate was not disclosed for the year ended March 31, 2008.

At March 31, 2009, certain subsidiaries have tax loss carryforwards aggregating approximately 6,913 million ($70,375 thousand) which are available to be offset against taxable income of such subsidiaries in future years. These tax loss carryforwards, if not utilized, will expire as follows:
Year Ending March 31 Millions of Yen Thousands of U.S. Dollars

2010 2011 2012 2013 2014 2015 and thereafter Total

198 142 132 407 866 5,164 6,913

$ 2,020 1,453 1,352 4,148 8,819 52,580 $70,375

68

12. SUPPLEMENTAL CASH FLOW INFORMATION a. Acquisition of Consolidated Subsidiaries A company was acquired during the year ended March 31, 2009. Assets and liabilities of the company at the time of consolidation were as follows:
2009

Millions of Yen

Thousands of U.S. Dollars

Assets Liabilities

2,218 (860)

$22,588 (8,757)

For the year ended March 31, 2008, three companies were acquired. Assets and liabilities of these companies at the time of consolidation were as follows:
2008

Millions of Yen

Assets Liabilities

1,352 (310)

b. Exclusion from Consolidation For the year ended March 31, 2009, four companies were excluded from consolidation due to sale of stocks. Assets and liabilities of these companies at the time of consolidation exclusion were as follows:
Millions of Yen Thousands of U.S. Dollars

Assets Liabilities

10,590 (5,555)

$107,818 (56,551)

c. Significant Noncash Investing and Financing Activities For the year ended March 31, 2008, the Company contributed investment securities to the employee retirement benefit trust. The contribution amount was included in decrease in accrued pension and severance costs in the consolidated statements of cash flows for the year ended March 31, 2008. The carrying amount and the contribution amount of these securities were 924 million and 8,312 million, respectively. 13. RESEARCH AND DEVELOPMENT COSTS Research and development costs charged to income were 1,259 million ($12,819 thousand) and 905 million for the years ended March 31, 2009 and 2008, respectively.

69

14. LEASES The Group leases certain structures, computer equipment and other assets. Obligations under finance leases and future minimum payments under noncancelable operating leases were as follows:
Millions of Yen
2009

Thousands of U.S. Dollars

2009

Finance leases

Operating leases

Finance leases

Operating leases

Due within one year Due after one year Total

1,870 2,286 4,157

3,854 22,244 26,098

$19,045 23,274 $42,319

$ 39,242 226,449 $265,692

Pro forma information for the year ended March 31, 2008 Pro forma information for the year ended March 31, 2008 of leased property such as acquisition cost, accumulated depreciation, accumulated impairment loss, obligations under finance leases, depreciation expense, interest expense and other information of finance leases that do not transfer ownership of the leased property to the lessee on an as if capitalized basis was as follows:
Millions of Yen
2008

Buildings and Structures

Equipment and Other

Software

Total

Acquisition cost Accumulated depreciation Net leased property The above acquisition cost included related interest expenses. Obligations under finance leases:

51 (29) 22

9,608 (5,095) 4,512

2,553 (1,575) 978

12,213 (6,699) 5,514

Millions of Yen
2008

Due within one year Due after one year Total Depreciation expense, interest expense under finance leases:

2,261 3,252 5,514

Millions of Yen
2008

Depreciation expense Lease payments Depreciation expense, which is not reflected in the accompanying consolidated statements of operations, is computed by the straight line method.

2,746 2,746

70

15. RELATED PARTY DISCLOSURES Transactions with companies of which directors of the company were representative for the years ended March 31, 2009 and 2008 were as follows:
Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Sales Purchases Nonoperating transaction The balances due from these companies at March 31, 2009 and 2008 were as follows:

2,035 3,378 49

Millions of Yen
2009 2008

Thousands of U.S. Dollars

2009

Trade accounts receivable Trade accounts payable Other payable

33 101 5

Note: On October 17, 2006, the ASBJ issued ASBJ Statement No.11, Accounting Standard for Related Party Disclosures and ASBJ Guidance No.13, Guidance on Accounting Standard for Related Party Disclosures. As a result, there are not any transactions that need to be disclosed at March 31, 2009.

Summary of financial data for principal affiliate: For the year ended March 31, 2009, Publicis Groupe S.A. is a principal affiliate. A summary of this companys financial data is presented below. The companys stock is listed on Euronext Paris.
Amount (Millions of Euros) At December 31, 2008

Current assets Non-current assets Current liabilities Non-current liabilities Total equity

6,657 5,203 7,496 2,014 2,350

January 1, 2008 to December 31, 2008

Revenue Income of consolidated companies before taxes Net income attributable to equity holders of the parent
Note: This summary shows consolidated financial data. Income of consolidated companies before taxes includes income before income taxes and minority interests.

4,704 672 447

71

16. DERIVATIVES The Group enters into foreign exchange forward contracts, currency option contracts and interest swap transactions to manage its exposures to fluctuations in foreign currency exchange risks. All derivative transactions are entered into to hedge foreign currency exposures incorporated within its business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabilities. Because the counterparties to these derivatives are limited to major financial institutions, the Group does not anticipate any losses arising from credit risk. The Group had the following derivatives contracts outstanding at March 31, 2009 and 2008:
Millions of Yen
2009

Currency

Contract Amount

Fair Value

Unrealized Gain (Loss)

Foreign currency forward contracts: To buy foreign currencies

To sell foreign currencies

USD EUR Other USD EUR Other USD USD

3,495 969 385 2,192 317 19 82 [5] 164 [5]

3,435 1,064 400 2,210 259 20 4 7

(59) 94 14 (18) 58 (1) (0) (1)

Currency options To buy foreign currencies To sell foreign currencies

Millions of Yen
2008

Currency

Contract Amount

Fair Value

Unrealized Gain (Loss)

Foreign currency forward contracts: To buy foreign currencies

To sell foreign currencies Currency options To buy foreign currencies To sell foreign currencies

USD EUR Other USD USD USD

5,827 168 30 3,092 695 [32] 1,356 [34]

5,534 170 27 3,009 21 66

(292) 1 (2) 82 (11) (32)

72

Thousands of U.S. Dollars

2009

Currency

Contract Amount

Fair Value

Unrealized Gain (Loss)

Foreign currency forward contracts: To buy foreign currencies

To sell foreign currencies

USD EUR Other USD EUR Other USD USD

$35,580 9,869 3,922 22,316 3,234 195 $ 838 [55] 1,677 [57]

$34,976 10,836 4,073 22,503 2,638 206 $ 45 72

$(603) 967 151 (187) 596 (11) $ (9) (15)

Currency options To buy foreign currencies To sell foreign currencies

Derivative transactions which qualify for hedge accounting for the years ended March 31, 2009 and 2008 are excluded from the disclosure of market value information. The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts exchanged by the parties and do not measure the Groups exposure to credit or market risk. Option premiums within the above schedules are disclosed in brackets ([ ]). As these option transactions are Zero Cost Options, they are not charged. 17. CONTINGENT LIABILITIES At March 31, 2009, the Group had the following contingent liabilities:
Millions of Yen Thousands of U.S. Dollars

Guarantees of loans or other liabilities

10,265

$104,506

18. NET INCOME (LOSS) PER SHARE Basic net income (loss) and diluted net income per share as well as the number of shares in the following table have been adjusted to reflect the 100-for-1 stock split that become effective on January 4, 2009. Reconciliation of the differences between basic net income (loss) and diluted net income per share (EPS) for the years ended March 31, 2009 and 2008 were as follows:
Millions of Yen
Year Ended March 31, 2009 Net Loss

Thousands of Shares
Weighted-average Shares

Yen
EPS

U.S. Dollars

Basic EPS: Net loss available to common shareholders

(20,453)

256,931

(79.61)

$(0.81)

Note: Although dilutive securities exist with regard to diluted net income per share, diluted net income per share for the fiscal year ended March 31, 2009 is not disclosed because of the Groups net loss position.

73

Millions of Yen
Year Ended March 31, 2008 Net Income

Thousands of Shares
Weighted-average Shares

Yen
EPS

Basic EPS: Net income available to common shareholders Effect of dilutive securities: Warrants of a consolidated subsidiary Warrants of affiliated companies Stock options of the Company Total Diluted EPS Net income for computation

36,246 0 1,079 1,079 35,166

274,539 100 100 274,639

132.03

128.05

19. SEGMENT INFORMATION The advertising segment provides clients with advertising strategy planning and related creative services, and with assistance in the placement of advertisements in various media, such as television, newspapers, magazines, radio, trains and buses, billboards and the Internet. The advertising segment also provides clients with sales promotion, event marketing, interactive communications, brand management, sports and entertainment marketing, public relations, direct marketing, market research and e-solution services. The information services segment provides clients with information services, such as information technology management. Information about industry segments, geographic segments and sales to foreign customers of the Company and subsidiaries for the years ended March 31, 2009 and 2008 were as follows: a. Industry Segments (1) Sales and operating income:
Millions of Yen
2009

Advertising

Information Services

Other Business

Eliminations/ Corporate

Consolidated

Sales to customers Intersegment sales Total sales Operating expenses Operating income

1,800,214 946 1,801,160 1,767,236 33,924

63,150 11,998 75,148 71,255 3,893

23,805 14,565 38,371 36,647 1,723

(27,510) (27,510) (31,153) 3,643

1,887,170 1,887,170 1,843,986 43,184

(2) Total assets, depreciation, impairment loss and capital expenditures:

Millions of Yen
2009

Advertising

Information Services

Other Business

Eliminations/ Corporate

Consolidated

Total assets Depreciation Impairment loss Capital expenditures

1,075,929 15,749 1,405 7,381

59,701 3,096 5,888

104,658 752 198

(147,746) (1,597) (793)

1,092,543 18,001 1,405 12,674

74

(1) Sales and operating income:

Thousands of U.S. Dollars
2009

Advertising

Information Services

Other Business

Eliminations/ Corporate

Consolidated

Sales to customers Intersegment sales Total sales Operating expenses Operating income

$18,326,520 9,635 18,336,156 17,990,801 $ 345,355

$642,884 122,144 765,028 725,395 $ 39,632

$242,347 148,280 390,628 373,082 $ 17,545

$(280,060) (280,060) (317,152) $ 37,091

$19,211,753 19,211,753 18,772,127 $ 439,625

(2) Total assets, depreciation, impairment loss and capital expenditures:

Thousands of U.S. Dollars
2009

Advertising

Information Services

Other Business

Eliminations/ Corporate

Consolidated

Total assets Depreciation Impairment loss Capital expenditures (1) Sales and operating income:

$10,953,168 160,333 14,305 75,142

$607,775 31,524 59,941

$1,065,442 7,658 2,017

$(1,504,083) (16,260) (8,076)

$11,122,303 183,256 14,305 129,024

Millions of Yen
2008

Advertising

Other Business

Eliminations/ Corporate

Consolidated

Sales to customers Intersegment sales Total sales Operating expenses Operating income (2) Total assets, depreciation, impairment loss and capital expenditures:

1,955,471 1,564 1,957,035 1,907,155 49,880

102,083 29,114 131,197 128,136 3,060

(30,678) (30,678) (33,864) 3,185

2,057,554 2,057,554 2,001,427 56,126

Millions of Yen
2008

Advertising

Other Business

Eliminations/ Corporate

Consolidated

Total assets Depreciation Impairment loss Capital expenditures

1,247,458 15,250 39 9,908

196,348 2,262 33 3,486

(191,894) (1,512) (1,197)

1,251,912 16,000 72 12,197

Note: Change in business segmentation Although the Information Services business had previously been included in Other Business, for the first quarter of the consolidated fiscal year, the absolute value of operating losses from the Information Services business exceeded 10% of the absolute value of the total amount of operating income from a segment in which operating income was produced. Therefore, for this consolidated fiscal year, the Information Services has been separately presented.

75

Segment information by business category according to the same business segmentation for the previous consolidated fiscal year is as follows: (1) Sales and operating income:
Millions of Yen
2009

Advertising

Other Business

Eliminations/ Corporate

Consolidated

Sales to customers Intersegment sales Total sales Operating expenses Operating income (2) Total assets, depreciation, impairment loss and capital expenditures:

1,800,214 946 1,801,160 1,767,236 33,924

86,956 26,418 113,375 107,742 5,633

(27,365) (27,365) (30,992) 3,626

1,887,170 1,887,170 1,843,986 43,184

Millions of Yen
2009

Advertising

Other Business

Eliminations/ Corporate

Consolidated

Total assets Depreciation Impairment loss Capital expenditures (1) Sales and operating income:

1,075,929 15,749 1,405 7,381

164,330 3,836 6,086

(147,716) (1,584) (793)

1,092,543 18,001 1,405 12,674

Thousands of U.S. Dollars

2009

Advertising

Other Business

Eliminations/ Corporate

Consolidated

Sales to customers Intersegment sales Total sales Operating expenses Operating income (2) Total assets, depreciation, impairment loss and capital expenditures:

$18,326,520 9,635 18,336,156 17,990,801 $ 345,355

$ 885,232 268,950 1,154,182 1,096,835 $ 57,346

$(278,585) (278,585) (315,509) $ 36,923

$19,211,753 19,211,753 18,772,127 $ 439,625

Thousands of U.S. Dollars

2009

Advertising

Other Business

Eliminations/ Corporate

Consolidated

Total assets Depreciation Impairment loss Capital expenditures

$10,953,168 160,333 14,305 75,142

$1,672,912 39,057 61,959

$(1,503,778) (16,134) (8,076)

$11,122,303 183,256 14,305 129,024

76

b. Geographical Segments The geographical segments of the Company and its subsidiaries for the years ended March 31, 2009 and 2008 are summarized as follows:
Millions of Yen
2009

Japan

Others

Eliminations/ Corporate

Consolidated

Sales to customers Interarea transfer Total sales Operating expenses Operating income Total assets

1,721,735 1,858 1,723,594 1,684,337 39,257 942,751

165,434 12,975 178,410 174,342 4,067 152,844

2009

(14,834) (14,834) (14,693) (141) (3,051)

1,887,170 1,887,170 1,843,986 43,184 1,092,543

Thousands of U.S. Dollars

Japan

Others

Eliminations/ Corporate

Consolidated

Sales to customers Interarea transfer Total sales Operating expenses Operating income Total assets
Note: Others consists substantially of the United States of America and China.

$17,527,596 18,924 17,546,521 17,146,870 $ 399,650 $ 9,597,385

$1,684,156 132,095 1,816,252 1,774,839 $ 41,412 $1,555,986

Millions of Yen
2008

$(151,019) (151,019) (149,582) $ (1,437) $ (31,068)

$19,211,753 19,211,753 18,772,127 $ 439,625 $11,122,303

Japan

Others

Eliminations/ Corporate

Consolidated

Sales to customers Interarea transfer Total sales Operating expenses Operating income Total assets
Note: Others consists substantially of the United States of America and China.

1,875,598 1,991 1,877,590 1,821,785 55,804 1,043,948

181,955 14,751 196,706 196,453 253 213,841

(16,742) (16,742) (16,811) 68 (5,876)

2,057,554 2,057,554 2,001,427 56,126 1,251,912

c. Sales to Foreign Customers Sales to foreign customers for the years ended March 31, 2009 and 2008 amounted to 164,972 million ($1,679,449 thousand) and 185,632 million, respectively.

77

20. SUBSEQUENT EVENTS a. Appropriation of Retained Earnings The Board of Directors have proposed the following appropriation of retained earnings at March 31, 2009, which was subject to approval at the Companys shareholders meeting to be held on June 26, 2009:
Millions of Yen Thousands of U.S. Dollars

Year-end cash dividends, 15 ($0.15) per share

3,723

$37,904

b. Acquisition of All Shares of cyber communications inc. On May 21, 2009, the Company decided to acquire all shares of cyber communications inc. (cci) by way of a share exchange under Article 796, clause 3 of Companies Act. As a result, cci will become a wholly owned subsidiary. (1) Purpose of the Share Exchange Advertising techniques that make full use of the Internet have become highly developed and have become more efficient at a rapid pace, and many new marketing approaches that connect users to companies, and further, users to other users, have been developed. The Internet, at the same time, has been placed at the heart of the cross media marketing. The Internet combines with other various advertising media. The importance of the Internet for the marketing activities of companies has developed at a rapid pace. In those situations, for the future growth strategy of the Group including cci and to reorganize the field of digital business of the group, the Company has decided to acquire cci. (2) Share exchange ratio The Company will deliver 23.62 shares of common stock of the Company in exchange for each one (1) share of common stock of cci; provided, however, that the Company shall not allot any shares through the Share Exchange with respect to shares of common stock of cci held by the Company (445,709 shares at May 21, 2009). The Company will deliver treasury stock for all common shares to be allocated, instead of the issuance of new shares. (3) Expected date of share exchange July 31, 2009

78

79

Non-Consolidated Financial Summary

Dentsu Inc. Years Ended March 31

2005

2006

2007

2008

Millions of yen Thousands of U.S. dollars(1) except per share data except per share data 2009 2009

For the year: Net sales Cost of sales Gross profit Selling, general and administrative expenses Operating income Income (loss) before income taxes Net income (loss) At year-end: Total assets Total equity Per share data (yen/dollar): Cash dividends(2) Net income (loss) Basic Diluted(3) Ratios (%): Operating margin(4) Return on equity (ROE)(5) Return on assets (ROA)(6) Equity ratio(7) Dividend payout ratio(8)

1,531,939 1,318,289 213,649 171,932 41,717 46,732 26,321 1,105,635 448,276 15 9,748.28 9,740.55 19.5 6.0 3.8 40.5 15.4

1,577,131 1,362,987 214,144 174,929 39,214 45,076 21,537 1,102,001 464,524 25 7,901.97 7,892.39 18.3 4.7 3.6 42.2 31.3

1,602,062 1,385,322 216,739 178,242 38,496 39,707 22,243 1,135,805 487,345 30 8,111.36 8,103.44 17.8 4.7 3.4 42.9 37.0

1,585,982 1,369,289 216,692 180,410 36,281 38,865 24,533 1,112,758 491,819 35 8,936.06 8,932.81 16.7 5.0 3.2 44.2 39.2

1,447,410 1,254,694 192,716 168,845 23,870 (25,466) (32,771) 986,741 383,028 35 (127.55) 12.4 (7.5) 2.3 38.8

$14,734,915 12,773,028 1,961,887 1,718,877 243,010 (259,252) (333,624) $10,045,214 3,899,297 $ 0.36 (1.30)

Notes: (1)U.S. dollar amounts have been translated from yen at the rate of 98.23 = US$1, the approximate exchange rate prevailing on the Tokyo Foreign Exchange Market on March 31, 2009. (2)Diluted net income per share for the fiscal year ended March 31, 2009, is not recorded because Dentsu recorded a net loss per share. (3)Based on the number of shares outstanding after the stock split implemented in January 2009. (4)Operating margin = operating income gross profit 100 (5)ROE = net income (loss) average total shareholders equity based on total shareholders equity at the beginning and end of the fiscal 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 net income per share 100

81

(Billions of yen) 2,000

(Billions of yen) 240

(Years Ended March 31)

1,500

180

1,000

120

500

60

0 2005 2006 2007 2008 2009

0 2005 2006 2007 2008 2009

Net Sales
(Billions of yen) 80 (%) 24 (Billions of yen) 40

Gross Profit
(%) 8

60

18

20

40

12

20

-20

-4

0 2005 2006 Operating income 2007 2008 Operating margin 2009

-40 2005 2006 Net income (loss) 2007 2008 Return on equity (ROE) 2009

-8

Operating Income, Operating Margin

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

Information/Communications 14.8% Others 25.8% Beverages/Cigarettes 10.0%

Content Services 5.7% Others 1.9% Marketing/Promotion 11.8% Television Time 23.7%

Creative 12.3% Hobbies/Sporting Goods 5.2% Distribution/Retailing 5.3% Pharmaceuticals/Medical Supplies 5.4% Home Electric Appliances/AV Equipment 5.9% Cosmetics/Toiletries 7.3% Automobiles/Related Products 7.2% Finance/Insurance 6.9% Foodstuffs 6.1% OOH Media 2.9% Interactive Media 1.8% Radio 1.5% Magazines 4.1% Newspapers 10.1% Television Spots 24.2%

Net Sales by Industry (Fiscal Year Ended March 31, 2009)

Net Sales by Business Category (Fiscal Year Ended March 31, 2009)

82

Sales
(Years ended March 31)

(Millions of yen) 2,000,000

1,500,000

1,000,000

500,000

0 2005

2006

2007

2008

2009

Time Spot Newspapers Magazines Radio Interactive Media OOH Media Creative Marketing/Promotion Content Services Others

Net Sales by Business Category (Non-Consolidated)

Millions of yen Years ended March 31 2005 2006 2007 2008 2009

Television Time Spot Newspapers Magazines Radio Interactive Media (1) OOH Media (2) Creative Marketing/Promotion Content Services (3) Others Total

749,349 48.9% 346,135 22.6 403,214 26.3 203,314 13.3 72,514 4.7 26,289 1.7 11,293 0.7 37,445 2.4 165,099 10.8 172,518 11.3 76,838 5.0 17,276 1.1 1,531,939 100.0%

750,302 47.6% 347,147 22.0 403,155 25.6 197,745 12.5 74,670 4.7 25,844 1.6 18,767 1.2 36,152 2.3 171,008 10.8 185,266 11.7 92,089 5.8 25,283 1.6 1,577,131 100.0%

748,856 46.7% 357,603 22.3 391,252 24.4 193,731 12.1 73,703 4.6 24,746 1.5 21,545 1.3 43,075 2.7 188,230 11.7 173,321 10.8 109,980 6.9 24,871 1.6 1,602,062 100.0%

734,205 46.3% 348,098 21.9 386,107 24.3 181,545 11.4 69,914 4.4 23,704 1.5 23,990 1.5 48,904 3.1 198,792 12.5 179,051 11.3 100,578 6.3 25,294 1.6 1,585,982 100.0%

692,992 47.9% 343,431 23.7 349,561 24.2 146,766 10.1 60,010 4.1 22,014 1.5 26,220 1.8 42,056 2.9 177,438 12.3 170,868 11.8 82,104 5.7 26,938 1.9 1,447,410 100.0%

Notes: (1) Interactive Media refers to Internet and mobile-related media. (2) OOH Media stands for out-of-home media, and comprises transportation and outdoor billboard advertising. (3) Content Services refers to rights sales, planning and production and other content-related services in the sports and entertainment fields.

83

(Millions of yen) 2,000,000

1,500,000

1,000,000

500,000

0 2005 2006 2007 2008 2009

Information/Communications Beverages/Cigarettes Cosmetics/Toiletries Automobiles/Related Products Finance/Insurance Foodstuffs Home Electric Appliances/AV Equipment Pharmaceuticals/Medical Supplies Distribution/Retailing Hobbies/Sporting Goods Others

Net Sales by Industry (Non-Consolidated)

Millions of yen Years ended March 31 2005 2006 2007 2008 2009

Information/Communications 198,782 13.0% Beverages/Cigarettes 161,674 10.6 Cosmetics/Toiletries 136,179 8.9 Automobiles/Related Products 134,895 8.8 Finance/Insurance 111,409 7.3 Foodstuffs 85,277 5.6 Home Electric Appliances/ AV Equipment 71,707 4.7 Pharmaceuticals/Medical Supplies 73,617 4.8 Distribution/Retailing 69,175 4.5 Hobbies/Sporting Goods 44,555 2.9 Others 444,665 29.0 Total 1,531,939 100.0%

204,243 156,944 130,240 130,968 144,237 84,793

13.0% 10.0 8.3 8.3 9.1 5.4

240,657 157,784 121,126 130,130 133,429 86,894

15.0% 9.8 7.6 8.1 8.3 5.4

227,675 152,749 117,011 123,701 123,375 88,300

14.4% 9.6 7.4 7.8 7.8 5.6

214,144 144,963 106,299 103,493 99,716 88,752

14.8% 10.0 7.3 7.2 6.9 6.1

110,826 7.0 76,755 4.9 73,134 4.6 50,907 3.2 414,081 26.3 1,577,131 100.0%

106,876 6.7 75,623 4.7 79,788 5.0 56,939 3.6 412,812 25.8 1,602,062 100.0%

91,677 5.8 85,057 5.4 77,683 4.9 73,067 4.6 425,682 26.8 1,585,982 100.0%

85,920 5.9 78,508 5.4 76,505 5.3 75,211 5.2 373,893 25.8 1,447,410 100.0%

Notes: (1) The above ranking is based on data for the fiscal year ended March 31, 2009. (2) Dentsu reviews the criteria for each industry category frequently for the purposes of its own accounts. Accordingly, these categories may differ qualitatively from those used in Advertising Expenditures in Japan for the respective years. Figures for previous years have been recalculated to reflect the current industry breakdown, as of March 31, 2009.

84

Market Data
(Calendar years)
(Millions of U.S. dollars) 500,000 405,304.0 400,000 300,000 4,000 200,000 100,000 0 2004

488,943.8 427,677.8 458,137.9

494,744.4

(Billions of yen) 8,000

(%) 1.6

6,000

1.2

0.8

2,000

0.4

0 2005 2006 2007 2008 2004 2005 2006 2007 2008

United States Japan Germany United Kingdom China France Rest of Europe Rest of Asia-Pacific Latin America Others

Advertising expenditures in Japan Advertising expenditures in Japan as a percentage of nominal GDP

Size of Major Advertising Markets

Advertising Expenditures in Japan and Advertising Expenditures in Japan as a Percentage of Nominal GDP

Size of Major Advertising Markets

2004 2005

Millions of U.S. dollars at current prices 2006 2007 2008

United States Japan Germany United Kingdom China France Rest of Europe Rest of Asia-Pacific Latin America Others Total

$161,487.1 39.8% 42,206.8 10.4% 23,695.5 5.8% 21,133.2 5.2% 10,419.6 2.6% 13,630.4 3.4% 70,818.3 17.5% 32,771.9 8.1% 14,389.8 3.6% 14,751.3 3.6% $405,304.0 100.0%

$166,234.9 38.9% 45,911.4 10.7% 24,795.0 5.8% 21,789.4 5.1% 12,134.2 2.8% 13,870.2 3.2% 72,392.4 16.9% 35,077.5 8.2% 18,592.0 4.3% 16,880.9 3.9% $427,677.8 100.0%

$174,837.9 38.2% 46,419.3 10.1% 26,404.1 5.8% 22,145.1 4.8% 14,590.4 3.2% 14,474.4 3.2% 80,318.8 17.5% 37,687.3 8.2% 21,472.7 4.7% 19,787.9 4.3% $458,137.9 100.0%

$179,251.1 36.7% 46,762.8 9.6% 27,628.1 5.7% 23,553.7 4.8% 16,901.0 3.5% 14,928.3 3.1% 90,345.4 18.5% 41,406.2 8.5% 25,109.5 5.1% 23,057.7 4.7% $488,943.8 100.0%

$171,913.0 34.7% 44,946.8 9.1% 27,540.3 5.6% 22,810.1 4.6% 20,073.8 4.1% 14,946.4 3.0% 93,679.1 18.9% 43,363.4 8.8% 28,884.7 5.8% 26,586.9 5.4% $494,744.4 100.0%

Note: These totals are for major mass media, including television, newspapers, magazines, radio, cinema, outdoor and Internet advertising. Source: Zenith Optimedia, Advertising Expenditure Forecasts , July 2009

Advertising Expenditures in Japan and Advertising Expenditures in Japan as a Percentage of Nominal GDP
2004
Previous Category

Billions of yen 2005 2006

New Category

2007

2008

Advertising expenditures in Japan Nominal GDP Advertising expenditures in Japan as a percentage of nominal GDP

5,857.1 498,328.4 1.18%

6,823.5 501,734.4 1.36%

6,939.9 507,364.8 1.37%

7,019.1 515,804.9 1.36%

6,692.6 507,371.3 1.32%

Notes: (1) The method for estimating advertising expenditures in Japan was modified in 2007, and data from 2005 onward has been retroactively revised. (2) Advertising expenditures include expenditures on television, newspapers, magazines and radio advertising, expenditures on marketing flyers inserted in newspapers, exhibitions and screen displays, direct mailings, outdoor advertisements, transit advertisements, advertisements in telephone directories, point-of-purchase (POP) advertisements, satellite media-related and Internet advertisements. Source: Dentsu, 2008 Advertising Expenditures in Japan

85

Advertising Expenditures in Japan by Medium

2004
Previous Category

Billions of yen 2005 2006

New Category

2007

2008

Television Newspapers Magazines (1) Radio Satellite Media-Related (1) Internet Promotional Media (1) Total (1)

2,043.6 34.9% 1,055.9 18.0 397.0 6.8 179.5 3.1 43.6 0.7 181.4 3.1 1,956.1 33.4 5,857.1 100.0%

2,041.1 29.9% 1,037.7 15.2 484.2 7.1 177.8 2.6 48.7 0.7 377.7 5.6 2,656.3 38.9 6,823.5 100.0%

2,016.1 29.0% 998.6 14.4 477.7 6.9 174.4 2.6 54.4 0.8 482.6 6.9 2,736.1 39.4 6,939.9 100.0%

1,998.1 28.5% 946.2 13.5 458.5 6.5 167.1 2.4 60.3 0.8 600.3 8.6 2,788.6 39.7 7,019.1 100.0%

1,909.2 28.5% 827.6 12.4 407.8 6.1 154.9 2.3 67.6 1.0 698.3 10.4 2,627.2 39.3 6,692.6 100.0%

Note: (1) The method for estimating advertising expenditures in Japan was modified in 2007, and data from 2005 onward has been retroactively revised. Sources: Dentsu, 2008 Advertising Expenditures in Japan

Advertising Expenditures in the Four Major Media in Japan by Industry

2004 2005

Billions of yen 2006 2007 2008

47.2 1.3% Foodstuffs 301.7 8.2 Beverages/Cigarettes 287.6 7.8 Pharmaceuticals/Medical Supplies 176.9 4.8 Cosmetics/Toiletries 379.1 10.3 Apparel/Fashion Accessories/Personal Items 96.5 2.6 Precision Instruments/Office Supplies 47.4 1.3 Home Electric Appliances/AV Equipment 82.4 2.3 Automobiles/Related Products 254.9 6.9 Household Products 66.9 1.8 Hobbies/Sporting Goods 142.3 3.9 Real Estate/Housing Facilities 155.9 4.2 Publications 151.3 4.1 Information/Communications 266.4 7.3 Distribution/Retailing 254.8 6.9 Finance/Insurance 291.2 7.9 Transportation/Leisure 284.5 7.7 Food Services/Other Services 124.0 3.4 Government/Organizations 46.8 1.3 Education/Medical Services/Religion 130.9 3.6 Classified Ads/Others 86.3 2.4 Total 3,676.0 100.0%
Energy/Materials/Machinery

50.1 1.3% 302.3 8.1 282.2 7.5 184.5 4.9 326.0 8.7 110.7 3.0 40.8 1.1 90.7 2.4 248.2 6.6 67.6 1.8 162.7 4.4 166.0 4.4 148.2 4.0 267.7 7.2 253.9 6.8 327.2 8.8 288.1 7.7 147.3 3.9 52.3 1.4 136.7 3.7 86.7 2.3 3,740.8 100.0%

56.2 1.5% 298.9 8.2 276.5 7.5 177.9 4.9 319.3 8.7 123.2 3.4 42.3 1.2 91.9 2.5 235.0 6.4 62.5 1.7 165.2 4.5 166.8 4.5 143.1 3.9 268.5 7.3 234.8 6.4 304.7 8.3 288.0 7.9 148.4 4.0 43.6 1.2 128.8 3.5 90.5 2.5 3,666.8 100.0%

64.0 1.8% 299.3 8.4 263.7 7.4 182.8 5.1 311.4 8.7 127.8 3.6 44.6 1.2 85.0 2.4 216.9 6.1 63.8 1.8 156.9 4.4 173.0 4.8 137.1 3.8 266.7 7.5 223.4 6.3 246.2 6.9 289.7 8.1 151.8 4.3 54.1 1.5 119.2 3.3 91.5 2.6 3,569.9 100.0%

48.7 1.5% 301.4 9.1 246.8 7.5 183.6 5.6 293.8 8.9 115.8 3.5 40.8 1.2 81.8 2.5 192.2 5.8 61.0 1.8 169.2 5.1 147.5 4.5 114.1 3.5 241.4 7.3 210.6 6.4 212.9 6.4 269.4 8.2 144.2 4.4 45.5 1.4 100.1 3.0 77.7 2.4 3,299.5 100.0%

Notes: (1) The method for estimating advertising expenditures in Japan was modified in 2007, and data from 2005 onward has been retroactively revised. (2) Expenditures include expenditures on terrestrial television, newspapers, magazines and radio advertising, including related creative production costs. Source: Dentsu, 2008 Advertising Expenditures in Japan

86

(Millions of yen) 3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2004

2005

2006

2007

2008

Dentsu Hakuhodo Asatsu-DK Daiko Advertising Tokyu Agency East Japan Marketing & Communications Yomiko Advertising Delphys Asahi Advertising Frontage

Net Sales of the Top 10 Advertising Companies in Japan (Non-Consolidated) Net Sales
Calendar years 2004 2005

Millions of yen
2006 2007 2008

Dentsu Hakuhodo Asatsu-DK Daiko Advertising Tokyu Agency East Japan Marketing & Communications Yomiko Advertising Delphys Asahi Advertising Frontage

1,505,234 674,631 373,897 144,466 137,781 89,066 107,331 67,640 57,756 45,195

1,559,149 705,250 384,849 145,901 124,656

22.8% 10.3 5.6 2.1 1.8

1,606,759 714,391 378,804 136,092 123,175

23.2% 10.3 5.5 2.0 1.8

1,588,769 716,975 387,860 137,947 121,971

22.6% 10.2 5.5 2.0 1.7

1,499,154 705,751 358,596 138,622 116,387

22.4% 10.5 5.4 2.1 1.7

Reference: Advertising Expenditures in Japan (Billions of yen)

96,203 1.4 102,119 1.5 78,541 1.2 57,000 0.8 48,589 0.7 6,823.5 100.0%

101,993 1.5 90,522 1.3 61,447 0.9 57,011 0.8 50,645 0.7 6,939.9 100.0%

109,794 1.6 98,025 1.4 60,768 0.9 57,984 0.8 43,398 0.6 7,019.1 100.0%

104,159 1.6 89,489 1.3 55,723 0.8 51,578 0.8 44,249 0.7 6,692.6 100.0%

Notes: (1) Rankings in each category are limited to the top 10 advertising companies in terms of net sales and are based on 2008 data. (2) The scope of data used to calculate the net sales of the top 10 advertising companies and that used in Advertising Expenditures in Japan , included here for reference, differ. Percentages are calculated using data from Advertising Expenditures in Japan. (3) I&S BBDO, McCann-Erickson, Ogilvy & Mather Japan, JWT Japan, Grey Worldwide, Draftfcb (Former: FCB Worldwide) did not disclose these figures publicly in 2007 and 2008. Sources: Figures for 2004 through 2007 are from the Advertising and Economy Research Institutes Current Situation of Japanese Advertising Agencies 2007 and those for 2008 are from Advertising and Economy published on February 21, 2009. The reference figures are from the 2008 edition of Dentsus Advertising Expenditures in Japan.

87

(Millions of yen) 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2004

2005

2006

2007

2008

Dentsu Hakuhodo Asatsu-DK Daiko Advertising Tokyu Agency East Japan Marketing & Communications Yomiko Advertising Delphys Asahi Advertising Frontage

Net Sales of the Top 10 Advertising Companies in Japan in the Four Mass Media (Non-Consolidated) Four Mass Media
Calendar years 2004 2005

Millions of yen
2006 2007 2008

Dentsu Hakuhodo Asatsu-DK Daiko Advertising Tokyu Agency East Japan Marketing & Communications Yomiko Advertising Delphys Asahi Advertising Frontage
Reference: Advertising Expenditures in Japan (Billions of yen)

1,045,664 449,971 240,311 91,416 58,966 11,594 59,990 36,540 39,554 33,443

1,033,490 449,362 240,753 94,595 52,405

27.6% 12.0 6.4 2.5 1.4

1,051,129 457,287 241,300 90,149 48,585

28.7% 12.5 6.6 2.5 1.3

1,011,403 451,684 244,976 90,376 47,933

28.3% 12.7 6.9 2.5 1.3

959,619 416,504 220,278 90,338 45,575

29.1% 12.6 6.7 2.7 1.4

12,649 0.3 55,844 1.5 35,515 0.9 38,657 1.0 36,651 1.0 3,740.8 100.0%

12,291 0.3 49,652 1.4 26,920 0.7 37,607 1.0 35,831 1.0 3,666.8 100.0%

15,442 0.4 50,293 1.4 25,153 0.7 36,806 1.0 29,028 0.8 3,569.9 100.0%

12,685 0.4 44,077 1.3 21,864 0.7 32,007 1.0 31,230 0.9 3,299.5 100.0%

Notes: (1) Rankings in each category are limited to the top 10 advertising companies in terms of net sales and are based on 2008 data. (2) The scope of data used to calculate the net sales of the top 10 advertising companies and that used in Advertising Expenditures in Japan, included here for reference, differ. Percentages are calculated using data from Advertising Expenditures in Japan. (3) I&S BBDO, McCann-Erickson, Ogilvy & Mather Japan, JWT Japan, Grey Worldwide, Draftfcb (Former: FCB Worldwide) did not disclose these figures publicly in 2007 and 2008. Sources: Figures for 2004 through 2007 are from the Advertising and Economy Research Institutes Current Situation of Japanese Advertising Agencies 2007 and those for 2008 are from Advertising and Economy published on February 21, 2009. The reference figures are from the 2008 edition of Dentsus Advertising Expenditures in Japan.

88

History

1901Hoshiro Mitsunaga establishes Japan Advertising Ltd. and Telegraphic Service Co. 1906Telegraphic Service becomes Japan Telegraphic Communication Co., Ltd. 1907Japan Advertising merges with Japan Telegraphic Communication and starts to engage in communication and advertising operations. 1936Japan Telegraphic Communication relinquishes its news services department to Domei News Agency and relaunches itself as a specialized advertising agency. 1943The Company acquires 16 companies in a move to augment its advertising agency business. Operational bases are established in Tokyo, Osaka, Nagoya and Kyushu. 1947Hideo Yoshida becomes the fourth President. The Dentsu Advertising Awards are created. 1949The Dentsu Advertising Essay Contest for Students is established. 1951Dentsu establishes the Radio Division at its head office and local offices. Commercial radio broadcasting begins in Japan. 1953Dentsu creates the Radio and Television Division at its head office and the Osaka office. Commercial television broadcasting begins. 1955Dentsu Advertising Ltd. becomes the new company name. 1967The Tsukiji Head Office Building is completed. 1974Advertising Age ranks Dentsu the No. 1 advertising agency worldwide in terms of billings in calendar year 1973. 1981The company formerly known as JIMA Dentsu Advertising, Ltd., and U.S. partner Young & Rubicams Japanese affiliate establish Dentsu Young & Rubicam as a joint venture in Tokyo. 1984Dentsu and U.S.-based Young & Rubicam jointly establish DYR, an international service network. 1988Advertising Age names Dentsu the 1987 International Agency of the Year. 1989Net sales exceed 1 trillion in the fiscal year ended March 31, 1989. 1993Yutaka Narita becomes the ninth President. 1995Dentsu establishes five domestic regional subsidiaries. 1996The JapanChina Advertising Education Exchange Project commences. Dentsu Actis (Tokyo) and three other Group companies merge to form Dentsu Tec Inc. Cyber Communications Inc. is established. 1997Dentsu Tec lists its shares on the over-the-counter market (now, JASDAQ).

2000Dentsu makes an equity investment in the BCOM3 Group. Cyber Communications lists its shares on the NASDAQ Japan market of the Osaka Securities Exchange (now, Hercules). (In 2003, the company lists on the MOTHERS section of the Tokyo Stock Exchange.) Information Services International-Dentsu, Ltd., lists its shares on the First Section of the Tokyo Stock Exchange. 2001Dentsu commemorates the 100th anniversary of its establishment and lists its shares on the First Section of the Tokyo Stock Exchange. 2002Tateo Mataki becomes the 10th President. The BCOM3 Group merges with Publicis Groupe S.A. Dentsu acquires a capital position in the Publicis Groupe. Dentsus new Shiodome Head Office Building is completed. 2003Dentsu East Japan Inc., Ad Dentsu Tokyo Inc. and Dentsu Tohoku Inc. merge, with Dentsu East Japan as the surviving company. Geneon Entertainment Inc. and Geneon Entertainment (USA) Inc. are converted to subsidiaries. 2004Dentsu Hokkaido Inc. and Ad Dentsu Hokkaido Inc. merge, with Dentsu Hokkaido as the surviving company. Dentsu Cayenne Holdings Ltd. is established. 2005Dentsu Group obtains BS7799 certification and Information Security Management Systems (ISMS) certification. All of Dentsus domestic branch offices receive ISO 14001:2004 certification. Dentsu East Japan Inc. and Dentsu EYE Inc. merge with Dentsu East Japan as the surviving company. 2006Dentsu Tec is converted to a wholly owned subsidiary and its shares are delisted. 2007Net sales reach 2 trillion in the fiscal year ended March 31, 2007. Tatsuyoshi Takashima becomes the 11th President. Basic agreement to reinforce capital and business alliance with OPT (currently, an affiliate accounted for under the equity method) 2008Dentsu obtains approximately 60 billion of treasury stock. Dentsu Holdings USA, Inc. acquires McGarry Bowen, LLC of the United States. Dentsu establishes Dentsu-Smart.

89

Subsidiaries and Affiliates

(As of March 31, 2009)

Dentsu conducts its business together with its subsidiaries and affiliates. As of March 31, 2009, the Dentsu Group included 126 consolidated subsidiaries and 29 affiliated companies accounted for under the equity method.
Equity Held by Dentsu Equity Held by Dentsu

Name Consolidated Subsidiaries Dentsu East Japan Inc. Dentsu West Japan Inc. Dentsu Kyushu Inc. Dentsu Hokkaido Inc. Dentsu Meitetsu Communications Inc.(1) Dentsu Young & Rubicam Inc. Cyber Communications Inc. Dentsu search & link INC. The Goal Inc. Dentsu Tec Inc. Dentsu Public Relations Inc. Dentsu Casting and Entertainment Inc. Dentsu Operations Development Inc. Dentsu Table Media Communications Inc. Information Services International-Dentsu, Ltd. Brainyworks, Ltd. Dentsu Facility Management Inc. Dentsu Holdings USA, Inc. Dentsu America, Inc. Dentsu Latin America Propaganda S/A

Geographic Area (Equity Held Indirectly) (%) Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan Japan U.S.A. U.S.A. Brazil 100.0 100.0 100.0 100.0 50.0 51.0 86.0 75.0 (51.0) 77.8 100.0 100.0 100.0 100.0 (56.0) 95.0 (95.0) 61.9 (0.0) 100.0 (100.0) 100.0 100.0 100.0 (100.0) 51.0

Name Beijing Dentsu Advertising Co., Ltd. Dentsu (Thailand) Ltd. Dentsu Media (Thailand) Ltd.

Geographic Area (Equity Held Indirectly) (%) China Thailand Thailand Taiwan Republic of Korea 70.0 100.0 (98.4) 100.0 (51.0) 100.0 (30.0) 85.0

Media Palette (Taiwan) Inc.

Dentsu Innovak Inc. and 101 other companies

Affiliated Companies Accounted for under the Equity Method Ad Gear Ltd. Frontage Inc. Beacon Communications K.K. Video Research Ltd. OPT, Inc.

Japan Japan Japan Japan Japan Japan France Germany Republic of Korea Republic of Korea

34.0 40.0 34.0 34.2 35.1 (0.0) 46.0 15.0 37.5 33.0 33.3

D2 Communications Inc. Publicis Groupe S.A.(2) DCTP Entwicklungsgesellschaft fr TV-Programm mbH Phoenix Communications Inc. PDS Media, Inc. and 19 other companies

Notes: (1) Although Dentsus ownership is 50% or less, the company is considered a subsidiary because Dentsu exerts effective control. (2) Although Dentsus ownership is less than 20%, the company is considered an affiliate because Dentsu has an effective impact on its operations.

90

Board of Directors, Corporate Auditors and Executive Officers

(As of August 27, 2009)

Representative Director Tatsuyoshi Takashima* Directors Ryuichi Mori* Kunihiko Tainaka* Tadashi Ishii* Yasushi Matsushita* Masuo Tachibana* Michio Niiyama* Takehiko Joju* Kotaro Sugiyama* Shoichi Nakamoto* Outside Directors Satoshi Ishikawa Masahiro Nakata Senior Corporate Auditors Toichi Ogitani Kimiharu Matsuda Corporate Auditors Yasuchika Negoro Atsuko Toyama Osamu Abe

Executive Officers Fumio Higuchi Tomoharu Tsuruda Shoichi Kishida Hiroshi Nishimura Mitsuro Shibata Naotoshi Ogisu Takeshi Mori Akira Kagami Hiroshi Nakahara Akira Sugimoto Soichi Akiyama Tomoki Utsumi Takehiko Miura Hirokazu Kizawa Kazumichi Iwagami Kunihiro Matsushima Tim Andree Kenji Shiratsuchi Akira Tonouchi Kaoru Shimura Naoki Tani Yuzuru Kato Ryuhei Akiyama Norihisa Awa Yoshio Takada

* Simultaneously serving as Executive Officer.

91

Information for Shareholders

(As of March 31, 2009)

Corporate Headquarters 1-8-1, Higashi-Shimbashi, Minato-ku, Tokyo 105-7001, Japan Phone: +81-3-6216-5111

Breakdown of Shareholders by Type

Number of Shareholders Number of Shares Held Percentage of Total Number of Shares Issued

Japanese financial institutions Investor Relations Department, Corporate Communications Division 1-8-1, Higashi-Shimbashi, Minato-ku, Tokyo 105-7001, Japan Phone: +81-3-6216-5111 E-mail: irmail@dentsu.co.jp Stock Exchange Listing Tokyo Stock Exchange, First Section Securities code: 4324 Total Number of Shares Issued 278,184,000 General Meeting of Shareholders The ordinary general meeting of shareholders is held in Tokyo in June each year. Transfer Agent The Mitsubishi UFJ Trust and Banking Corporation 1-4-5, Marunouchi, Chiyoda-ku, Tokyo 100-8212, Japan Internet Address http://www.dentsu.com Dentsu Inc. Kyodo News Jiji Press, Ltd. The Master Trust Bank of Japan, Ltd. (Trust accounts) Mizuho Corporate Bank, Ltd. Japan Trustee Services Bank, Ltd. (Trust accounts 4G) Japan Trustee Services Bank, Ltd. (Trust accounts) Group Employees' Stockholding Association Yoshida Hideo Memorial Foundation Recruit Co., Ltd. Major Shareholders Japanese securities firms Other Japanese corporations Treasury stock Japanese individuals and others Foreign institutions and individuals Total

123 27 649 1 41,415 387 42,602

69,974,011 2,838,009 83,580,311 29,960,751 63,618,517 28,212,401 278,184,000

25.15 1.02 30.04 10.77 22.87 10.14 100.00

Number of Shares Held

Percentage of Total Number of Shares Issued

29,960,751 20,488,800 19,748,680 12,235,600 11,328,880 9,552,500 8,918,500 8,182,778 4,984,808 4,929,900

10.77 7.37 7.10 4.40 4.07 3.43 3.21 2.94 1.79 1.77

92