01

Forward-Looking Statements

This annual report contains statements that const itute “forward- looking statements” regarding the intent, belief or

current expectat ions of Dentsu Inc. or it s management with respect to the results of operat ions and f inancial condit ion of

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

and uncertaint ies, and actual results may dif fer from those in the forward- looking statements as a result of various

factors. The information contained in this annual report ident if ies important factors that could cause such dif ferences.

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

announce any revisions to these forward- looking statements to ref lect future events, condit ions or circumstances.

Contents02　Dentsu Group Corporate Philosophy03　Dentsu Group Companies05　Dentsu in Brief07　Operating Highlights09　To Our Shareholders11　Medium-Term Management Plan15　Special Features: Creative Ideas for Innovation21　Corporate Social Responsibility25　Corporate Governance33　Management’s Discussion and Analysis of Financial Conditions and Operational Results44　Data Section

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 changeto people and society.

02

The 3 Elements of InnovationEntrepreneurship+Ideas+Technology

Slogan:Good Innovation.

By “Innovation” we are talking about much morethan just technological innovation.We mean generating new value for peopleand society through a wide variety of changes.

Dentsu Group Corporate Philosophy

GoodInnovation.

Entrepreneurship

Ideas Technology

Dentsu (the parent company) provides services to leading clients having main offices in Tokyo, Osaka and Nagoya. Regional clients are served by Dentsu’s 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.

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

●Phoenix Communications (Republic of Korea)●Dentsu Innovak (Republic of Korea)●Media Palette (Media agency in Taiwan)●Dentsu (Taiwan)●Dentsu Kuohua (Taiwan)

Branding Services

Spotlighting Beijing Dentsu Advertising, Dentsu has enhanced its ability to participate successfully 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.

China

Media Services

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

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

Asia

In Asia—the overseas segment where Dentsu has established the deepest connections, in terms of history and traditions—the 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.

Dentsu

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

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

03

Tota

l Adv

ertis

ing

Serv

ices

Over

seas

Mar

kets ●Dentsu Asia

(Singapore, regional headquarters)●Dentsu Singapore●Dentsu (Thailand)●Dentsu Plus (Thailand)●Dentsu (Malaysia)●Dentsu Utama (Malaysia)●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)

Dentsu GroupCompanies

Marketing Services Content Business

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

India, Middle East Europe and the Americas

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.

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 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

●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)

●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 für 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 CupTM hospitality services company in Switzerland)

(As of October 1, 2009)

04

Other Countries 31.8%

Japan 9.1%

United States 34.7%

Germany 5.6%

Russia 2.2%Brazil 2.3%

Italy 2.6%France 3.0%

China 4.1%United Kingdom 4.6%

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

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

● Dentsu’s Advertising Market Position

05

● Leader in Japan, the World’s Second-Largest Advertising Market

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

Share of Principal Mass Media＊3

(2008)Japanese Advertising Expenditure, by Percentage of Sales＊2

(2008)

Relative Scale of Advertising Markets, by Principal Media＊1

(2008)

(%)

0

10

20

30

40

50

● Dentsu　　● HDY　　● Asatsu-DK

2005

5.6%

22.8%

14.0%

2006

5.5%

23.2%

13.6%

2007

5.5%

22.6%

13.6%

2008

5.4%

22.4%

14.0%

● Dentsu ● Hakuhodo ● Daiko Advertising ● Yomiuri Advertising ● Asatsu-DK ● Others

(Billions of yen)

0

500

1,000

1,500

2,000

Television Newspapers Magazines Radio

14.4%

1,909.2

407.8

154.9

15.8%

37.3%

19.4%

827.6

＊1 : Advertising media includes television, newspapers, magazines, radio, movies, outdoor and Internet. Source: Prepared by Dentsu, based on ZenithOptimedia’s World Advertising Expenditure Forecasts, July 2009 edition

＊2 : (1) HDY refers to the simple total of non-consolidated net sales of Hakuhodo, Daiko Advertising and Yomiuri Advertising. (2) In some instances, the scope used in calculating net sales figures for individual companies differs from that used in Advertising Expenditures in Japan. Percentage figures refer to comparisons given in Advertising Expenditures in Japan.　　 Sources: Current Situation of Japanese Advertising Agencies, Advertising and Economy, Advertising Expenditures in Japan.

＊3 : (1) Non-consolidated figures for calendar year 2008. (2) In some instances, the scope used in calculating net sales figures for individual companies differs from that used in Advertising Expenditures in Japan. Percentage figures refer to comparisons given in Advertising Expenditures in Japan.　　 Sources: Individual net sales figures are from Advertising and Economy. The denominator for this calculation is from the 2008 edition of Advertising Expenditures in Japan.

Dentsu in Brief

Hakuhodo 15%ADK 5%

Dentsu 40%Others 40%

Standard & Poor’s (S&P) 　 AA- 　　　　　 A-1+

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

● Robust Financial BaseDentsu has a strong financial base, currently holding the highest Standard & Poor’s ranking of any advertising agency in the world.

By industry, the information/communications, beverages/cigarettes and cosmetics/toiletries sectors constitute a high percentage of net sales. Dentsu’s 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.

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

● Highly Regarded Creative Skills

06

● Dentsu’s Composition of Sales

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

Net Sales by Industry＊7

(Fiscal Year Ended March 31, 2009)Net Sales by Business Category＊8

(Fiscal Year Ended March 31, 2009)＊7 : Non-consolidated figures for the fiscal year ended March 31, 2009 ＊8 : Non-consolidated figures for the fiscal year ended March 31, 2009

Overseas RatingsGunn Report ’s Most Awarded Agency Rankings＊6

(1999 – 2008)

Ratings in JapanComparison of TV CM awards＊4 received at

the 2008 ACC CM Festival＊5

＊4 : Sponsored by the All Japan Radio & Television Commercial Confederation (ACC), established in 1961. 　　 This festival is regarded as the most authoritative contest in Japan for commercials.＊5 : Source: Prepared by Dentsu, based on Advertising and Economy, October 2008 edition.

Advertising Agency

DDB (London)

Dentsu

Crispin Porter & Bogusky (Miami)

Abbott Mead Vickers.BBDO (London)

AlmapBBDO (Sao Paulo)

Wieden & Kennedy (Portland, OR & N York)

TBWA \ Paris (Paris)

TBWA \ Chiat \ Day (USA)

Bartle Bogle Hegarty (London)

Lowe (London)

Ranking

　1

　2

　3

　4

　4

　6

　7

　8

　9

　10

Short-TermLong-Term

(As of September 31, 2009)

Others 25.8%

Beverages/Cigarettes 10.0%

Information/Communications 14.8%

Cosmetics/Toiletries 7.3%

Automobiles/Related Products 7.2%

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

Pharmaceuticals/Medical Supplies 5.4%

Distribution/Retailing 5.3%

Hobbies/Sporting Goods 5.2%

Content Services 5.7%

Marketing/Promotion 11.8%

Television Spots 24.2%

Television Time 23.7%

Others 1.9%

Newspapers 10.1%Magazines 4.1%

Radio 1.5%

OOH Media 2.9%

Creative 12.3%

Interactive Media 1.8%

07

¥1,910,4691,592,566

317,902

260,29957,603

54,92927,532

14,681

(8,289)

1,00669,901

¥1,240,037491,855

¥10,110.459,931.97

15

18.15.74.7

39.714.8

¥1,963,2961,637,400

325,896

267,12058,776

65,10331,002

81,058

(31,238)

(42,668)78,412

¥1,277,722521,180

¥11,300.3111,159.97

25

18.06.14.7

40.822.1

¥2,093,9761,745,584

348,391

285,55662,834

60,71230,688

41,962

(52,003)

(9,779)62,015

¥1,268,049554,760

¥11,193.1710,878.56

30

18.05.74.9

43.726.8

¥2,057,5541,712,332

345,222

289,09556,126

63,61036,246

56,007

(18,069)

(30,701)70,252

¥1,251,912567,293

¥13,202.7712,804.73

35

16.36.54.5

45.326.5

$19,211,75316,010,343

3,201,410

2,761,784439,625

(50,620)(208,217)

431,225

(226,650)

(282,485)583,030

$11,122,3034,607,228

$ (0.81)－

0.36

－－－－－

¥1,887,1701,572,696

314,474

271,29043,184

(4,972)(20,453)

42,359

(22,263)

(27,748)57,271

¥1,092,543452,568

¥　(79.61)－35

13.7(4.0)3.7

41.4－

Notes: (1)U.S. dol lar amounts have been t rans lated f rom yen at the rate of ¥98.23 = US$1, the approximate exchange rate prevai l ing on the Tokyo Fore ign Exchange Market on March 31, 2009. (2)Di luted net income per share for the f isca l year ended March 31, 2009, is not recorded because the Dentsu Group recorded a net loss per share. (3)Based on the number of shares outstanding after the stock sp l i t implemented in January 2009. (4)Operat ing margin = operat ing income ÷ gross prof i t × 100 (5)ROE = net income ( loss) ÷ average tota l shareholders’ equi ty based on tota l shareholders’ equi ty at the beginning and end of the f isca l year × 100 (6)ROA = operat ing income ÷ average total assets based on total assets at the beginning and end of the fiscal year × 100 (7)Equity ratio = total shareholders’ equity ÷ total assets × 100 (8)Dividend payout ratio = cash dividend per share ÷ consolidated net income per share × 100

For the year:Net salesCost of salesGross profitSelling, general and administrative expensesOperating incomeIncome (loss) before income taxes and minority interestsNet income (loss)Net cash provided by (used in) operating activitiesNet cash provided by (used in) investing activitiesNet cash provided by (used in) financing activitiesCash and cash equivalents, end of yearAt year-end: Total assetsTotal shareholders’ equityPer share data (yen/dollar): Net income　Basic　Diluted(2)

Cash dividends(3)

Ratios (%):Operating margin(4)

Return on equity (ROE)(5)

Return on assets (ROA)(6)

Equity ratio(7)

Dividend payout ratio(8)

2005 2006 2007 2008

Millions of yenexcept per share data

2009

Thousands of U.S. dollars(1)

except per share data2009

Dentsu Inc. and Consolidated SubsidiariesYears Ended March 31

Operating Highlights

Gross Profit

20090

200

300

400

500

100

0

20

40

60

80

2009

Net Sales

0

500

1,000

1,500

2,000

2,500

2009

0

300

600

900

1,200

(%)

0

2

4

6

8

1,500 10

2009

Total Assets, Return on Assets (ROA)

(%)

Total Shareholders’ Equity, Equity Ratio

0

12

24

36

48

20090

120

240

360

480

60600

(%)

0

4

8

2009

0

20

40

-8

-4

-40

-20

2005 2006 2007 2008 2005 2006 2007 2008

2005 2006 2007 2008 2005 2006 2007 2008

(%)

10

15

20

0

5

2005 2006 2007 2008 2005 2006 2007 2008

(Years Ended March 31)

08

(Billions of yen)

(Billions of yen)

(Billions of yen)

(Billions of yen)

(Billions of yen)

(Billions of yen)Operating Income, Operating Margin

Operating income Operating margin

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

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

Net income (loss) Return on equity (ROE)

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 Group’s performance and business direction in the following interview.

Q: Please summarize the Group’s 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 thefinancial crisis in the United States resulting in further serious conditions inboth 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 Group’s 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 Group’s 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

To Our Shareholders

Tatsuyoshi TakashimaPresident & CEO

Q: How does the Group’s 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 Japan’s 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 Japan’s 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.

10

Dawn of the New Platform Era

Clients

Clients

Consumers

Internet companies

Distribution companies

Platform

Platform

Platform

The Dentsu GroupThe Dentsu Group

Media companiesSpecialized companies

Consumers

Content providersOthers

Telecommunicationscompanies

Media companies

Collaboration

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.

11

Platform bringing clients and consumers together

A New Platform in a Changing Business EnvironmentEvolving 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 industry’s 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 products—all 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.

Medium-TermManagementPlan

• Quality solutions for clients

• New business model forthe new platform

Resultingcompetitiveness

Planning tools and methods Media content business• product development with existing traditional media companies • new media service development • new business with key players

• new market development

• database marketing business infrastructure• new information delivery system

• rich content distribution infrastructure

• direct solutions • Integrated Marketing Communications (IMC)

campaign planning 　　• media planning 　　

• tools customized for clients　

Technologies

Strengths intrinsic to the Dentsu Group• Extensive and detailed consumer information

• New channels of information and distribution

To be acquired or newly built

Reinforce marketing and intelligence

• Knowledge (insight)

• Creativity (ideas)

12

The Dentsu Group’s Strategic Edge in the New Platform EraDentsu will cross the strengths it has already cultivated—its knowledge, or insight, and its ideas, or creativity—with 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 Group’s 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 CompetitivenessThe 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 Group’s intrinsic strengths,

namely knowledge and ideas2) 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.

13

Dentsu Innovation 2013Management 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 InnovationContinue 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 InnovationSecure 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 InnovationReinforce competitiveness from a new perspective unconstrained by conventional concepts• Expand our port folio 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 InnovationOverhaul 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

14

● Business Targets• Consolidated operating income: ¥70 billion• Operating margin: 20% or higher• ROE: 8%

5) Cost InnovationImplement 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 Japan’s 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.

15

Creating New Value in the Platform EraWhether 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 insight—inspiration 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 dawned—the platform era—and no one, not clients, consumers or the media, is bound by communication stereotypes anymore. 　The Dentsu Group was quick to embrace media neutrality, a concept that facilitates the application of flexible creative expression, primarily solutions, in the platform era. We pinpoint client issues and consumer behavior and combine various interactive media with the four traditional mass media to move speedily toward a single goal. 　Comprehensive communication, with cross-media at the core, is exactly the way to deliver optimum solutions in this new era.

Underpinned by Solid Media-Built Relationships Media neutrality calls for flexibility in media planning to realize solutions that transcend a specific media format. It is an effective approach to successful communication in this complex platform era. 　Despite the obvious merits of integrated communication, the shift to media neutrality is not an easy transition for many advertising agencies. The Dentsu Group has taken a leadership role on the world stage in putting this concept into practice and thus embodies the creative insight needed in the new era primarily

because of its strong media development capabilities.　With many years of experience bringing advertisers and media together, Dentsu has developed close ties with all the major media companies. The connection to television broadcasters is particularly tight, through participation—providing financial and human resources—in the establishment of major commercial broadcasters and support for marketing activities and program production. 　The Group also enjoys a long-standing relationship with members of the newspaper community. This connection goes back to Dentsu’s 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.

Special Feature 1:

Creative Interview

Creative Ideasfor Innovation

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Creativity for Core IdeasProgress 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-house—people 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 Group’s 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.

Dentsu’s Potential in the Global MarketThe Cannes Lions International Advertising Festival is the venue for the world’s most prestigious advertising awards. At the 2009 event, Dentsu was honored as Media Agency of the Year. Members of the Dentsu Group took home five golds, two silvers and four bronzes.

　I participated in this advertising festival as jury president of the outdoor media category. The experience emphasized to me how progressive the Dentsu Group really is as a driving force in the media-neutral movement. It happened to be at Cannes, but could apply to any international advertising awards. What I saw first hand made me realize that the concept of creative expression had reached a turning point on a global scale. 　The quality of expression in media used to be in the spotlight. However, these days the focus is shifting to an assessment of how a solution is provided. Copywriting and art direction, as stand-alone efforts, are less noteworthy, while the trend to measure the quality of comprehensive solutions is gaining strength. 　Many mega advertising agencies abroad have not effected a smooth transition to media neutrality because their basic policy has been to outsource ad campaign planning to specialized companies. The Dentsu Group, however, created several advertising formats on its own, went through the process of putting them into practice and ensuring their reliability, and developed them into viable advertising techniques. 　For the Group, media neutrality isn’t a new concept in creative services; it’s 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. It’s so close I can touch it.　Value—created by the Dentsu Group in providing information to consumers over various media channels—means 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 won’t 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.

Profile

Akira Kagami

Executive Officer, Global Executive Creative DirectorDentsu 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 Japan’s 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.

Concept: “Paradigm Change”Interactive communication in the new era hinges on YouTube

New Approach Outside Preexisting FrameworkOn 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 Toyota’s forward-thinking ingenuity.

Cross-Media Communication: What this Era NeedsProgress 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 shape—cross-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 campaign—the vital nucleus of the planning process—and the scenario idea being the framework used to realize the core idea. 　First, we design a core, which will function like an engine to move the target. Then we add in multiple contact points, which connect the consumer to the brand, and link these points to the core with moving communication. Core ideas

and scenario ideas are a unit—imagine them as two sides of the same coin—and together, they make it possible to capture consumer interest and draw individuals out from their isolating information barriers.

Utilizing New Platform YouTubeIn 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 YouTube—the video-sharing site—to create some market buzz with a series of promotional movies entitled “Amazing Films” that played to the iQ’s drivability. Toyota’s co-sponsorship of live events and a fashion-inspired art show provided additional opportunities to raise the iQ’s 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 iQ’s 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 AcclaimAs 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

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Special Feature 2:

Dentsu-style cross-media communication planning

Creative Ideasfor Innovation

buzz was a breakthrough sales strategy that worked like a charm—orders during the month between announcement and the start of sales far exceeded initial goals. 　Amid diversification of contact points connecting consumers to brands, the iQcampaign marked a milestone, delivering Toyota’s message to a large segment of

its target market and successfully capturing that segment’s interest. 　This campaign is proof that Dentsu is definitely on the right track with its cross-media communication emphasis.

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Structure and Components of Paradigm Change Campaign

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

OOH: Draw attention with unconventional approaches to advertising●Ginza Sony Building

YouTube: Create a buzz

● iQ Channel

Event Co-Sponsorship: Raise iQ’s profile

●Live event ●Art exhibition

Invited 2,000 YouTube users to a live event for which Toyota was the main sponsor

Attracted the attention of passers-by with a vertical installation on the side of the Ginza Sony Building in Tokyo, and a performance by dancers suspended in mid-air

Delivered streaming video of the truly off-the-wall dance performance at the Ginza Sony Building to complement a series of promotional movies entitled “Amazing Films,” which emphasizes the iQ’s drivability

Showcased new-concept value through innovative two-brand collaboration, spotlighting the Somarta fashion brand and Toyota’s iQ

●Web-based ads linked to “iQ Amazing Films”

“Amazing Films” streaming online●Participatory content

●New Way iQ World ● iQ Visual Mix Contest

Product Ads: Elicit demand

●Television commercials linked to “iQ Amazing Films”

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

YouTube: Create a fan base

Linked the “Amazing Films” series delivered previously through YouTube to television commercials and Web-based ads. Highlighted great drivability through a unique presentation showing two iQs parking in a typical one-car space.

Used rich content, including flash movies, to underline the iQ’s five most appealing aspects: design, innovation, safety, performance and ecology

Special Web site: Spur interest and promote understanding

Fans generate original iQ-themed videos and post them on YouTube as part of a contest in which users vote for their favorite production. The winner receives an iQ.

● iQ Amazing Films

Movie relay featuring 1,000 men and women—each expressing a unique fashion style—that links to Google Maps so viewers can visit representative districts of Tokyo

Telling the World about Real Fashion in TokyoIn 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 1000—to coincide with the product announcement and introduced 1,000 different ways of wearing the colorful parkas.　Dentsu’s tasks were many—creating 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 Tokyo’s many unique districts, from upscale Yamanote and old-charm Shitamachi to business districts and areas frequented by young people such as Akihabara’s 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 ActivitiesThe Tokyo Fashion Map was a historical undertaking for several reasons. It marked the largest coordinated trial campaign using Tokyo as a backdrop. It generated the largest fashion photo collection ever. And it precipitated the largest distribution of street Jack, a monthly fashion magazine spotlighting best-selling clothes. 　Tokyo Graffiti, a magazine by Graffiti Magazines that produces exceptional street snapshots, was also involved in the project, reinforcing the map concept. 　To create the Tokyo Fashion Map, the on-the-street crew approached 1,000

men and women and asked them to put on a UNIQLO parka. The resulting 1,000 poses went into a publication—TOKYO FASHION MAP with 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 UNIQLO’s 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 ContentTwo objectives—creating inviting content instead of just an advertisement and extending the reach of media through the power of creative expression—underpinned promotional activities fine-tuned to consumers rather than mass advertising distanced from consumers. 　We captured the public’s 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 UNIQLO’s 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 Dentsu’s success in expressing UNIQLO’s brand concept—“component-wear”—across 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.

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Special Feature 3:

Media Neutral Creativity—Thinking Outside the Box

Creative Ideasfor Innovation

The Tokyo Fashion Map

Parka relay movie screenshots

TOKYO FASHION MAP with UNIQLO magazine

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Advertising Elementary School

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

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For details on the Dentsu Group Charter of Corporate Conduct and information on the Group’s 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 SocietyActivities that contribute to the community fall under Dentsu’s 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 ProjectLearning how to convey a message by creating television commercialsAdvertising 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 Chair’s Special Award in the corporate social contribution category at the 2nd Kids Design Awards sponsored by Japan’s Ministry of Economy, Trade and Industry.

Corporate SocialResponsibility

Seminar to improve communication skills for NPOs Dentsu-China Advertising Educational Exchange Project UNESCO World Terakoya Movement

Dentsu received a certificate of appreciation fromChina’s Ministry of Education at

the 4th Advertising Education Seminar

Fifth anniversary forum, in March 2009 ECO FIRSTOutside view of a Terakoya school in Cambodia,pictured in 2006

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Public Relations Hints for NPOsSeminar project to acquire keys to better communicationFine-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 Dentsu’s 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 ExpertiseThe 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 China’s 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 China’s 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 companies—Dentsu, 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 MarkTo enrich Groupwide solutions to environmental concerns, Dentsu established the Environment Strategy Committee in July 2008. Naturally, this committee—chaired by the president—seeks to reduce the Group’s 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. 　Dentsu’s policy-based approach to environmental issues through the committee is highly regarded, a status substantiated by it being awarded the Eco First Mark by Japan’s Ministry of the Environment in November 2008. Dentsu is the first advertising agency to be approved under the ministry’s Eco First Program, which requires participants to make environmental commitments, disclose plans to reach stated goals and provide updates on progress.

CO2 Emissions (Years ended March 31)

2005 2006 2007 2008 2009

28,338

26,32325,819 25,880

24,253

CO2 (Tons)

20,000

22,500

25,000

27,500

30,000

Dentsu Green Event Guide 62nd Dentsu Advertising Awards: Environmental Advertising AwardWinning advertiser: TOSHIBA CORPORATION

“Manufacturing light goes out on ordinary incandescent bulbs”

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●ISO 14001 CertificationDentsu maintains the Dentsu Group Eco Program—an environment management system—and 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 Group’s environmental policy.

●CO2 ReductionWe aggressively embrace measures to reduce carbon dioxide (CO2) emissions. In March 2008, Dentsu’s 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 ImpactIn 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.

　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 CommunicationsFueled 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 IAA–Dentsu 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.

Winning entries in the IAA–Dentsu Global Students Poster Competition

World Grand PrixEntry title: “Thermometer” Artist: Matias Fernandez Garcia

(Universidad Argentina de la Empresa in Buenos Aires)

Asia/Pacific RegionEntry title: “Paper” Artist: Yuki Nakamura

(Kanazawa College of Art)

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4) Work/Life Balance: Supporting Employees’ Diverse Work StylesThe 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 Japan’s Ministry of Health, Labor and Welfare for its Work/Life Balance Promotion Project. Encouraged by this recognition, we will continue to contribute to the realization of a society in which employees can achieve an effective balance between work and private life.

3) Human Rights Awareness Activities: Communication Starts with Respect for Human RightsSubscribing 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 posters—dubbed Dentsu Human Rights Posters—to 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.

Status of Corporate Governance

1. Basic Policy on Corporate GovernanceIn 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 InstitutionsDentsu is a “Company with Board of Corporate Auditors” and has introduced an executive officer system for the execution of business. Dentsu’s 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). Dentsu’s 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 SharesDentsu’s Articles of Incorporation stipulate that the Company may, by resolution of the Board of Directors, acquire the Company’s 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 DividendsTo 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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Corporate Governance

Exemption from LiabilityDentsu’s 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 DirectorsDentsu’s Articles of Incorporation stipulate that resolutions for the election ofDirectors 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 ShareholdersExcept 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 Company’s 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 Company’s corporate governance structure is outlined in the chart below.

6. Status of Internal Control SystemThe 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 Committee—a vitally important corporate structure—is charged with creating, operating and improving the internal control system.

26

General Meeting of Shareholders

Appointment Appointment Appointment

Corporate AuditorsOffice

RepresentativeDirectors

Internal AuditDivision

IndependentAuditors Board of Directors

Corporate Auditors/Board of

Corporate Auditors

Executive Officersand

Their Respective Divisions

Conducting of internal audits

Conductingof

audits

Conductingof

audits

Appointment/Supervision

Conducting of audits

Compliance System for Directors, Executive Officers and EmployeesDirectors 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 Company’s 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 thereof—termed “antisocial forces” in Japan—when a link is recognized and to resolutely refuse any and all future requests. This department functions as the liaison between the affected in-house section and the relevant authorities to expedite an appropriate course of action.

Systems to Ensure Efficient Execution of Duties by Directors and Executive OfficersThe 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 OfficersInformation concerning the execution of business duties by Directors and Executive Officers is stored and managed appropriately in accordance with the Company’s documentation management regulations and information management guidelines.

Risk Management SystemEvery 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

27

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 StatusThe Corporate Auditors’ Office functions as support for employees who assist Auditors in their duties. This ensures independence from the Company’s Directors and Executive Officers.

System of Reporting to Corporate Auditors and Improving Audit EffectivenessPolicies 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 SubsidiariesDentsu 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.

System to Ensure Appropriateness of Financial ReportingThrough 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 AuditsThe 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 AuditorsIn 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.

28

Status of Independent AuditsDentsu has contracted the accounting firm Deloitte Touche Tohmatsu to perform accounting audits of the Company’s books. No special-interest relationships exist between Dentsu and the accounting firm, or Dentsu and the managing partners at the accounting firm who undertake accounting audits of the Company. 　The names of the certified public accountants that performed accounting audits during the fiscal year under review, as well as the assistants involved in the execution of these audits, are listed below.

Assistants involved in the execution of accounting audits: Five certified public accountants and 13 others

Cooperation on Internal Audits, Audits by Corporate Auditors and Independent AuditsThe Internal Audit Office, Corporate Auditors and Independent Auditors cooperate with each other. The Board of Corporate Auditors may request reports from the Independent Auditors and the Internal Audit Office on auditing methods and results of audits, as appropriate. It is mainly full-time Corporate Auditors who meet with other Auditors on a regular and individual basis to exchange information. The Internal Audit Office also exchanges information and reports, as appropriate, in response to requests from Corporate Auditors or the Board of Corporate Auditors, and will participate in a separate exchange of information with the Independent Auditors.

8. Limited Liability Agreements with Outside Directors and Outside AuditorsDentsu 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 AuditorsDentsu’s executive directory includes outside Directors and outside Auditors. As of June 26, 2009, two of the Company’s 12 Directors and three of the Company’s 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 shareholderof the Company. A business relationship exists between Dentsu and Jiji Press.

• An outside Auditor, Atsuko Toyama, is the President of the New National TheatreFoundation. 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.

29

Names of Certified Public AccountantsName of Company to which

These Accountants Belong

Designated and engagement partners Deloit te Touche Tohmatsu

Takashi Nagata

Hitoshi Matsumoto

Tsutomu Hirose

Takashi Sedo

10. Executive Compensation

Total Compensation Paid in Fiscal 2008

Notes: 1. The totals for Directors and Corporate Auditors above include, respectively, three Directors and three Corporate Auditors (including two outside Auditors) who retired at the conclusion of the 159th Ordinary General Meeting of Shareholders on June 27, 2008. Of these executives, 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 executive’s 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)

30

Directors

(Outside Directors)

Corporate Auditors

(Outside Auditors)

Total

(Outside Executives)

19

(2)

¥735 million

(¥13 million)

8

(5)

¥121 million

(¥32 million)

26

(7)

¥856 million

(¥45 million)

Number Amount paid Number Amount paid Number Amount paid

31

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)

2. Other Significant Details Regarding CompensationFor 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 Company’s independent auditing firm, Deloitte Touche Tohmatsu.

3. Details of Non-Auditing Services Provided to the Parent Company by the Independent AuditorsDentsu paid for guidance and consultation services on the preparation and establishment of internal controls for financial reporting.

Category

Fiscal 2008

Compensation for

independent

auditing services

(Millions of yen)

Compensation for

non-auditing services

(Millions of yen)

Compensation for

independent

auditing services

(Millions of yen)

Compensation for

non-auditing services

(Millions of yen)

ー

ー

ー

Parent company

Consolidatedsubsidiaries

Total

ー

ー

ー

139

185

324

22

8

30

Fiscal 2007

32

4. Policy for Determining Compensation to the Independent AuditorsCompensation for audits performed by the Company’s 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.

Any forward-looking statements in the following discussion are based on the Dentsu Group’s judgment as of the date of submitting the Financial Reports.

OverviewDentsu (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 Group’s 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 EstimatesThe Dentsu Group’s 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

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 Group’s 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 Company’s consolidated financial statements and therefore have a material impact on these statements.

Revenue RecognitionConsolidated 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

33

Management’s Discussion and Analysis of Financial Conditions and Operational ResultsDentsu Inc. and Consolidated Subsidiaries As of June 26, 2009

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 AccountsAn 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 InvestmentsTo 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.

Deferred Tax AssetsThe 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 CostsRetirement 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 ProfitConsolidated 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

34

Net Sales

(Billions of yen)

0

500

1,000

1,500

2,000

2,500

20092005 2006 2007 2008

Gross Profit

20090

200

300

400

500

(Billions of yen)

100

2005 2006 2007 2008

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 ExpensesSelling, 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

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

RevenueConsolidated 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 Group’s competitive position vis-à-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.

35

Operating Margin

20092005 2006 2007 2008

(%)

0

4

8

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

2009

(Billions of yen)

0

20

40

Net income (loss) Return on equity (ROE)

-8

-4

-40

-20

2005 2006 2007 2008

(%)

10

15

20

0

5

　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 Dentsu’s own research—revised 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 company’s 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

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-à-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 yen—the Dentsu Group’s reporting currency—and 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 ExpensesThe 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 Company’s 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

36

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 Dentsu’s 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 OutlookRepercussions 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 Dentsu’s 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 Group’s solution capabilities, management will spotlight the digital domain. Joint activities will be encouraged throughout the Group and

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 Group’s 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 China—the BRICs—include 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 Group’s 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 Group’s 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 AssetsAs 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 receivable—trade, 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 payable—trade. 　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

37

(Billions of yen)

0

300

600

900

1,200

(%)

0

2

4

6

8

1,500 10

2009

Total Assets, Return on Assets (ROA)Total assets Return on assets (ROA)

2005 2006 2007 2008

appreciation and a decline in the market price of investment securities.

Cash FlowsCash 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 RequirementsThe Group’s 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 PolicyThe 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

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 & Poor’s currently gives Dentsu’s 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 Dentsu’s long-term debt and a rating of a-1+ to its short-term debt.

Management Issues and Future PoliciesThe 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 Dentsu’s 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

38

(%)

Total Shareholders’ Equity, Equity Ratio

0

12

24

36

48

2009

(Billions of yen)

0

120

240

360

480

60600

2005 2006 2007 2008

Total shareholders’ equity Equity ratio

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 Group’s 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 Group’s 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. 　Management’s 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 RiskFluctuations in the economic and business environmentsThe 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 Group’s consolidated financial results may be

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 media—that is, newspapers, magazines, radio and television—declined 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 consumers—that is, how many hours do people spend in contact with media each day—in 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 JapanThe 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

39

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 client’s 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 Group’s efforts to respond to this change were ineffective, its financial results could be adversely affected.

Competition-Related RiskRisk related to competition among advertising agenciesCompetition among Japan’s 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 industriesAs the Group’s 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 entries—participants who vie with Group companies in the development of new business activities.

　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 CompaniesDentsu 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 Company’s 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 Company’s 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 CapabilitiesRisk related to the development of systems and databasesMembers 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 Group’s 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 Group’s R&D activities

40

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 businessesTo 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 proposals—which effectively mix several media and ad expressions into an approach that matches consumer behavior—and 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 Group’s 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 developmentAs part of its business diversification program, the Dentsu Group strives to expand the Group’s 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 Group’s efforts may not yield the anticipated results.

Risk related to expansion of the promotion businessThe 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 Group’s investments might not expand business as planned.

Risk Related to Content BusinessThe 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 Group’s content business depends on general public reaction, which can be difficult to predict. Consequently, the Group may not realize expected investment returns, and the Group’s financial results may be negatively affected by the results.

Risk Related to Global BusinessesRisk related to expansion of overseas businessesThe 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 Group’s 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 Group’s 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 Group’s 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 Group’s 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 Group’s financial results might be adversely affected.

Risk related to capital and business alliance with Publicis GroupeAt 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 Company’s 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 ResourcesThe 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

occur, the Group’s growth potential and its competitive edge might be adversely affected.

Risk Related to Legal or Regulatory ChangesAdvertising 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 Group’s 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 Group’s 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 Group’s credibility could be severely tarnished. This could adversely affect the Group’s financial results.

Risk of LitigationAs 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.

42

57

Contents45　Consolidated Balance Sheets47　Consolidated Statements of Operations48　Consolidated Statements of Changes in Equity49　Consolidated Statements of Cash Flows50　Notes to Consolidated Financial Statements79　Independent Auditors’ Report81　Non-Consolidated Financial Summary85　Market Data89　History90　Subsidiaries and Affiliates91　Board of Directors, Corporate Auditors and Executive Officers92　Information for Shareholders

44

Data Section

45

Thousands of U.S. Dollars

(Note 1)

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

160,803153,678

27,941342,422(89,783)252,639

158,868153,592

21,328333,789(80,751)253,038

1,637,0071,564,478

284,4443,485,930(914,016)

2,571,914

ASSETSCURRENT 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

¥ 57,2711,146

14,257413,438

5,1521,179

14,46427,59910,481

4,672(3,345)

546,317

2008

¥ 70,2521,325

18,996483,794

6,224321

22,76824,59013,146

4,452(4,871)

641,002

2009

$ 583,03011,667

145,1454,208,886

52,45612,004

147,253280,966106,698

47,570(34,060)

5,561,617

Millions of Yen

See notes to consolidated financial statements.

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 assetsTOTAL

67,233108,850

20,65826,36035,46636,129(1,112)

293,586¥1,092,543

85,455166,376

17,47724,30529,36735,981(1,093)

357,871¥1,251,912

684,4511,108,116

210,312268,351361,060367,808(11,328)

2,988,771$11,122,303

Consolidated Balance SheetsDentsu Inc. and Consolidated SubsidiariesMarch 31, 2009 and 2008

46

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 equityTOTAL

58,96761,583

0429,615

(2,440)126

(7,187)(20,730)(67,367)452,568

20,581473,149

¥1,092,543

58,96761,586

0460,444

4,339(559)

(7,179)(3,550)(6,754)

567,29323,567

590,861¥1,251,912

600,296626,936

04,373,566

(24,839)1,292

(73,166)(211,042)(685,814)

4,607,228209,523

4,816,752$11,122,303

Thousands of U.S. Dollars

(Note 1)

LIABILITIES AND EQUITYCURRENT 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

2009

¥ 18,6256,989

38,599328,822

8,7185,602

21,59221,124

450,075

2008

¥ 10,2895,134

53,120377,588

10,19613,27130,46727,434

527,504

2009

$ 189,61471,153

392,9523,347,475

88,75157,032

219,819215,051

4,581,851

118,48230,674

37610,293

9,493169,318

81,32431,559

57110,298

9,792133,547

1,206,169312,267

3,827104,790

96,6431,723,699

Millions of Yen

47

Thousands of U.S. Dollars

(Note 1)

Yen U.S. Dollars

NET SALESCOST OF SALES 　　　Gross profitSELLING, GENERAL AND ADMINISTRATIVE EXPENSES　　　Operating income

INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS

INCOME TAXES (Note 11):　Current　Deferred　　　Total income taxes

2009

¥1,887,1701,572,696

314,474271,290

43,184

2008

¥2,057,5541,712,332

345,222289,095

56,126

2009

$19,211,75316,010,343

3,201,4102,761,784

439,625

(4,972)

14,489177

14,667

63,610

25,140496

25,637

(50,620)

147,5101,811

149,322

MINORITY INTERESTS IN NET INCOME

NET INCOME (LOSS)

812

¥ (20,453)

1,726

¥ 36,246

8,274

$ (208,217)

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

2,995(2,521)

5988,970(875)864

(1,405)(51,116)

(5,666)(48,156)

3,382(2,542)

(81)8,499－

1,903(72)

(866)(2,738)7,484

30,499(25,673)

6,09591,318(8,908)8,797

(14,305)(520,378)

(57,690)(490,245)

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

2009

¥ (79.61)－

35.00

2008

¥ 132.03128.05

35.00

2009

$ (0.81)－

0.36See notes to consolidated financial statements.

Millions of Yen

Consolidated Statements of OperationsDentsu Inc. and Consolidated SubsidiariesYears Ended March 31, 2009 and 2008

48

BALANCE, APRIL 1, 2007　Net income　Cash dividends, ¥3,250 per share　Change of scope of equity method　Repurchase of treasury stock　Disposal of treasury stock　Other changes in the yearBALANCE, MARCH 31, 2008　Adjustment of retained earnings due to 　　an adoption of PITF No.18 (Note 2.s)　Stock split (Note 8)　Net loss　Cash dividends, ¥3,750 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 yearBALANCE, MARCH 31, 2009

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 yearBALANCE, MARCH 31, 2009

2,743,783.31－－－

(55.31)2,091.81－

2,745,819.81

－245,741,944.14

－－－－

(264,677.57)162.62－

248,223,249.00

OutstandingNumber ofShares of

Common Stock

¥58,967－－－－－－

¥58,967

－－－－－－－－－

¥58,967

$600,296

－－－－－－－－

$600,296

Common Stock

¥577,04636,246(8,920)

(410)(17)505

(13,588)¥590,861

(728)－

(20,453)(9,769)

114－

(60,650)34

(26,259)¥473,149

$6,015,080

(7,419)(208,217)(99,456)

1,169－

(617,430)354

(267,327)$4,816,752

Total Equity

¥61,474－－－－

111－

¥61,586

－－－－－－－(2)－

¥61,583

$626,963

－－－－－－

(27)－

$626,936

CapitalSurplus

¥ 0－－－－－－

¥ 0

－－－－－－－－(0)

¥ 0

$ 2

－－－－－－－(2)

$ 0

StockAcquisition

Rights

¥433,38336,246(8,920)

(410)－－

145¥460,444

(728)－

(20,453)(9,769)

1147－－－

¥429,615

$4,687,413

(7,419)(208,217)(99,456)

1,16977－－－

$4,373,566

RetainedEarnings

¥ 15,336－－－－－

(10,997)¥ 4,339

－－－－－－－－

(6,779)¥(2,440)

$ 44,172

－－－－－－－

(69,012)$(24,839)

Unrealized(Loss) Gain on

Available-for-saleSecurities

¥ 818－－－－－

(1,377)¥ (559)

－－－－－－－－

686¥ 126

$(5,696)

－－－－－－－

6,989$1,292

Deferred Gain(Loss) onDerivatives

under HedgeAccounting

¥(7,179)－－－－－－

¥(7,179)

－－－－－(7)－－－

¥(7,187)

$(73,089)

－－－－

(77)－－－

$(73,166)

LandRevaluationDifference

¥ (909)－－－－－

(2,641)¥ (3,550)

－－－－－－－－

(17,180)¥(20,730)

$ (36,142)

－－－－－－－

(174,899)$(211,042)

ForeignCurrency

TranslationAdjustments

$ (68,765)

－－－－－

(617,430)381－

$(685,814)

¥ (7,130)－－－(17)393－

¥ (6,754)

－－－－－－

(60,650)37－

¥(67,367)

TreasuryStock

¥554,76036,246(8,920)

(410)(17)505

(14,870)¥567,293

(728)－

(20,453)(9,769)

114－

(60,650)34

(23,273)¥452,568

$5,775,155

(7,419)(208,217)(99,456)

1,169－

(617,430)354

(236,925)$4,607,228

Total

¥22,285－－－－－

1,281¥23,567

－－－－－－－－

(2,986)¥20,581

$239,925

－－－－－－－

(30,401)$209,523

MinorityInterests

See notes to consolidated financial statements.

Common Stock Total Equity

CapitalSurplus

StockAcquisition

RightsRetainedEarnings

Unrealized(Loss) Gain on

Available-for-saleSecurities

Deferred Gain(Loss) onDerivatives

under HedgeAccounting

LandRevaluationDifference

ForeignCurrency

TranslationAdjustments

TreasuryStock Total

MinorityInterests

Millions of Yen

Thousands of U.S. Dollars (Note 1)

Consolidated Statements of Changes in EquityDentsu Inc. and Consolidated SubsidiariesYears Ended March 31, 2009 and 2008

49

See notes to consolidated financial statements.

Millions of Yen

Thousands of U.S. Dollars

(Note 1)

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 activitiesFOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTSNET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTSCASH AND CASH EQUIVALENTS, BEGINNING OF YEARINCREASE IN CASH AND CASH EQUIVALENTS RESULTING FROM MERGERCASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIESCASH AND CASH EQUIVALENTS, END OF YEAR

¥ (4,972)

(22,022)18,001

1,4053,454

(35)51,116(8,970)

63,9927,190

(51,902)(688)(762)

(3,562)(11,740)

1,85547,33142,359

(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)

9,88340,000(7,349)

710(60,650)

(9,769)(601)

28(27,748)

(5,519)(13,172)70,252

190－

¥ 57,271

¥ 63,610

(30,213)16,000

724,238(294)866

(8,499)

12,4233,8735,836

783(7,106)(2,375)(6,917)3,710

(7,603)56,007

(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)

(3,846)26

(17,861)140(17)

(8,920)(626)404

(30,701)168

7,40562,015－

832¥ 70,252

$ (50,620)

(224,194)183,256

14,30535,165

(361)520,378(91,318)

651,454

73,203(528,382)

(7,009)(7,759)

(36,266)(119,518)

18,893481,845431,225

(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)

100,620407,207(74,822)

7,231(617,430)

(99,456)(6,122)

288(282,485)

(56,184)(134,094)715,185

1,939－

$ 583,030

200920082009

Consolidated Statements of Cash FlowsDentsu Inc. and Consolidated SubsidiariesYears Ended March 31, 2009 and 2008

50

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTSThe 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 POLICIESa. 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.

Notes to Consolidated Financial StatementsDentsu Inc. and Consolidated SubsidiariesYears Ended March 31, 2009 and 2008

51

d. Marketable and Investment Securities—Marketable and investment securities are classified and accounted for, depending on management’s 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.

52

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 lessee’s 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.

53

　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 weighted- average 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 PronouncementsBusiness CombinationsOn 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.

54

Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity MethodThe 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 associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s 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.

55

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities at March 31, 2009 and 2008 consisted of the following:

　The carrying amounts and aggregate fair values of marketable and investment securities at March 31, 2009 and 2008 were as follows:

Current:　Debt securities　OtherTotalNon-current:　Equity securities　Debt securities　OtherTotal

March 31

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

March 31

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

March 31

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

Cost

¥27,6962,0141,000

Cost

¥27,6302,1141,000

Cost

$281,95920,51210,180

2009

$　　15211,851

$　12,004

$653,83819,44411,168

$684,451

Fair Value

¥25,4411,9181,006

Fair Value

¥35,5272,0781,000

Fair Value

$259,00319,52510,243

2008

¥　　149171

¥　　321

¥　82,2301,9861,238

¥　85,455

Unrealized Loss

¥(6,148)(97)－

Unrealized Loss

¥(1,538)(36)－

Unrealized Loss

$(62,591)(987)－

2009

¥　　151,164

¥　1,179

¥64,2261,9091,097

¥67,233

Unrealized Gains

¥3,89306

Unrealized Gains

¥9,4360－

Unrealized Gains

$39,6350

63

Millions of Yen

Millions of Yen

Thousands of U.S. Dollars

2008

2009

Thousands of U.S. Dollars

2009

Millions of Yen

56

　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:

　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:

　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:

4. INVENTORIESInventories at March 31, 2009 and 2008 consisted of the following:

Available-for-sale:　Equity securities　OtherTotal

Held-to-maturity:　Corporate bondsTotal

ProceedsGross realized gainsGross realized losses

Due in one year or lessDue after one year through five yearsDue after five years through ten yearsTotal

Merchandise and finished goodsWorksWork-in-processRaw materials and suppliesTotal

2009

¥38,7841,006

¥39,791

－－

2009

¥9,003856215

2009

¥　　341,269

12,953207

¥14,464

2008

¥46,702102

¥46,805

¥　　50¥　　50

2008

¥2,6401,375

169

¥1,041 1 5

¥1,048

2008

¥　7061,055

20,785221

¥22,768

2009

$394,83410,249

$405,083

－－

2009

$91,6528,7152,194

$10,6012050

$10,672

2009

$ 　34812,928

131,8652,111

$147,253

Thousands of U.S. Dollars

Thousands of U.S. Dollars

Millions of YenThousands of U.S. Dollars

Thousands of U.S. Dollars

Carrying Amount

Millions of Yen

Millions of Yen

Millions of Yen

5. LONG-LIVED ASSETSAt 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 DEBTShort-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:

　Annual maturities of long-term debt, excluding finance leases (see Note 14) at March 31, 2009, were as follows:

　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:

　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.

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　UnsecuredLease obligations　　　TotalLess current portionLong-term debt, less current portion

2009

¥ 12121,301

4,157125,471

(6,989)¥118,482

2008

¥ 2986,429－

86,459(5,134)

¥81,324

2009

$ 1311,234,872

42,3191,277,323

(71,153)$1,206,169

201020112012201320142015 and thereafterTotal

¥ 5,11818,62018,61324,35825,85628,747

¥121,314

$ 52,108189,555189,490247,970263,226292,652

$1,235,004

Vehicles — net of accumulated depreciationCash and cash equivalentsInvestment securitiesTotal

¥ 1385

1¥100

$ 132873

20$1,026

Thousands of U.S. Dollars

Millions of YenThousands of U.S. Dollars

Millions of YenThousands of U.S. Dollars

Year Ending March 31

57

Millions of Yen

7. ACCRUED PENSION AND SEVERANCE COSTSThe 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:

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

　Assumptions used for the years ended March 31, 2009 and 2008 were set forth as follows:

　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.

Discount rateExpected rate of return on plan assetsRecognition period of actuarial gain/lossAmortization period of prior service benefits

2009

mainly 2.0%mainly 2.5%

mainly 17 yearsmainly 17 years

2008

2.0 to 2.5%mainly 2.5%

9.8 to 18 years15 to 18 years

Projected benefit obligationFair value of plan assetsUnrecognized prior service benefitsUnrecognized actuarial loss　Net liabilityPrepaid pension costThe liability for employees’ retirement benefits

2009

¥156,723(89,250)12,053

(58,039)21,487

8,288¥ 29,775

2008

¥ 155,547(114,552)

13,056(31,284)22,767

7,777¥ 30,544

2009

$1,595,473(908,584)122,709

(590,853)218,745

84,377$ 303,122

Thousands of U.S. Dollars

Service costInterest costExpected return on plan assetsRecognized actuarial lossAmortization of prior service benefitsContributions for defined contribution pension plansNet periodic benefit costsExpenses for early retirement programTotal

2009

¥ 7,2053,026

(1,430)2,182

(1,002)683

10,664106

¥10,770

2009

$ 73,35030,806

(14,557)22,220

(10,204)6,954

108,5681,080

$109,649

2008

¥ 7,3092,965

(1,517)(128)

(1,004)597

8,221261

¥ 8,483

Thousands of U.S. Dollars

58

Millions of Yen

Millions of Yen

8. EQUITYSince 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

2003 Stock Option

Cyber Communications INC.Stock Option

2000 Stock Option

2001 Stock Option

2003 Stock Option

2004 Stock Option

2005 Stock Option

Information Services International — Dentsu INC.Stock Option

2001 Stock Option

2002 Stock Option

Exercise Price

¥ 2,285

Exercise Price

¥ 27,500

¥211,595

¥ 60,500

¥113,048

¥242,005

Exercise Price

¥ 5,843

¥ 1,700

Exercise Period

From July 8, 2005 to July 7, 2009

Exercise Period

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

From June 29, 2005 to June 28, 2014

From June 29, 2006 to June 28, 2015

Exercise Period

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

Date of Grant

July 8, 2003

Date of Grant

July 8, 2000

July 25, 2001

July 30, 2003

August 4, 2004

September 21, 2005

Date of Grant

September 6, 2001

November 20, 2002

Number of Options Granted

1,138,000 shares

Number of Options Granted

22,640 shares

2,752 shares

2,800 shares

3,400 shares

4,400 shares

Number of Options Granted

100,000 shares

116,000 shares

Persons Granted

12 directors104 employees19 directors in subsidiaries

Persons Granted

8 directors34 employees6 directors94 employees9 directors2 auditors10 employees3 others3 directors3 executive officers62 employees2 others3 directors7 executive officers116 employees7 others

Persons Granted

9 directors4 employees10 directors3 employees6 others

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.

60

Criteria Communications INC.Stock Option

2005 Stock Option

2005 Stock Option

2005 Stock Option

2005 Stock Option

Dentsu search & link INC.Stock Option

2006 Stock Option

Exercise Price

¥20,000

¥20,000

¥20,000

¥20,000

Exercise Price

¥44,000

Exercise Period

From listed day to January 31, 2010

From listed day to June 24, 2010

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

Exercise Period

From August 12, 2008 to August 11, 2016

Date of Grant

February 1, 2005

July 26, 2005

January 31, 2006

March 28, 2006

Date of Grant

August 23, 2006

Number of Options Granted

6,050 shares

2,000 shares

22,500 shares

1,750 shares

Number of Options Granted

2,000 shares

Persons Granted

2 directors1 auditor10 employees34 others2 directors1 auditor9 employees1 other1 affiliated company

3 directors3 employees21 others

Persons Granted

3 directors31 employees1 other

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.

61

b. The stock option activity is as follows:

DENTSU INC.For the year ended March 31, 2008

Non-vested

March 31, 2007 —Outstanding　Granted　Canceled　VestedMarch 31, 2008 —Outstanding

Vested

March 31, 2007 —Outstanding　Vested　Exercised　CanceledMarch 31, 2008 —Outstanding

Exercise priceAverage stock price at grant date

For the year ended March 31, 2009

Non-vested

March 31, 2008 —Outstanding　Granted　Canceled　VestedMarch 31, 2009 —Outstanding

Vested

March 31, 2008 —Outstanding　Vested　Exercised　CanceledMarch 31, 2009 —Outstanding

Exercise priceAverage stock price at grant date

2001 Stock Option

－－－－－

340,000－

100,000240,000

0

¥ 2,814¥ 3,385

－－－－－

－－－－－

－－

2003 Stock Option

－－－－－

472,600－

105,800－

366,800

¥ 2,285¥ 3,243

－－－－－

366,800－

11,600－

355,200

¥ 2,285¥ 2,475

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.

62

Cyber Communications INC.For the year ended March 31, 2008

Non-vested

March 31, 2007 —Outstanding　Granted　Canceled　VestedMarch 31, 2008 —Outstanding

Vested

March 31, 2007 —Outstanding　Vested　Exercised　CanceledMarch 31, 2008 —Outstanding

Exercise priceAverage stock price at grant date

For the year ended March 31, 2009

Non-vested

March 31, 2008 —Outstanding　Granted　Canceled　VestedMarch 31, 2009 —Outstanding

Vested

March 31, 2008 —Outstanding　Vested　Exercised　CanceledMarch 31, 2009 —Outstanding

Exercise priceAverage stock price at grant date

2004 Stock Option

－－－－－

2,750－－10

2,740

¥113,048－

－－－－－

2,740－－50

2,690

¥113,048－

2005 Stock Option

－－－－－

3,899－－

1133,786

¥242,005－

－－－－－

3,786－－

1033,683

¥242,005－

2003 Stock Option

－－－－－

1,850－

198－

1,652

¥60,500¥80,500

－－－－－

1,652－－－

1,652

¥60,500－

2001 Stock Option

－－－－－

851－－54

797

¥211,595－

－－－－－

797－－

797－

¥211,595－

2000 Stock Option

－－－－－

2,537－－－

2,537

¥27,500－

－－－－－

2,537－

2,537－－

¥27,500¥42,180

63

Information Services International — Dentsu INC.For the year ended March 31, 2008

Non-vested

March 31, 2007 —Outstanding　Granted　Canceled　VestedMarch 31, 2008 —Outstanding

Vested

March 31, 2007 —Outstanding　Vested　Exercised　CanceledMarch 31, 2008 —Outstanding

Exercise priceAverage stock price at grant date

For the year ended March 31, 2009

Non-vested

March 31, 2008 —Outstanding　Granted　Canceled　VestedMarch 31, 2009 —Outstanding

Vested

March 31, 2008 —Outstanding　Vested　Exercised　CanceledMarch 31, 2009 —Outstanding

Exercise priceAverage stock price at grant date

2001 Stock Option

－－－－－

100,000－－－

100,000

¥ 5,843－

－－－－－

100,000－－

50,00050,000

¥ 5,843－

2002 Stock Option

－－－－－

116,000－－－

116,000

¥ 1,700－

－－－－－

116,000－－

56,00060,000

¥ 1,700－

64

65

Criteria Communications INC.For the year ended March 31, 2008

Non-vested

March 31, 2007 —Outstanding　Granted　Canceled　VestedMarch 31, 2008 —Outstanding

Vested

March 31, 2007 —Outstanding　Vested　Exercised　CanceledMarch 31, 2008 —Outstanding

Exercise priceAverage stock price at grant date

For the year ended March 31, 2009

Non-vested

March 31, 2008 —Outstanding　Granted　Canceled　VestedMarch 31, 2009 —Outstanding

Vested

March 31, 2008 —Outstanding　Vested　Exercised　CanceledMarch 31, 2009 —Outstanding

Exercise priceAverage stock price at grant date

2005 Stock Option

22,500－－－

22,500

－－－－－

¥20,000－

22,500－－－

22,500

－－－－－

¥20,000－

2005 Stock Option

1,750－－－

1,750

－－－－－

¥20,000－

1,750－

1,600－

150

－－－－－

¥20,000－

2005 Stock Option

2,000－－－

2,000

－－－－－

¥20,000－

2,000－

2,000－－

－－－－－

¥20,000－

2005 Stock Option

6,050－－－

6,050

－－－－－

¥20,000－

6,050－

5,695－

355

－－－－－

¥20,000－

66

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.

Dentsu search & link INC.For the year ended March 31, 2008

Non-vested

March 31, 2007 —Outstanding　Granted　Canceled　VestedMarch 31, 2008 —Outstanding

Vested

March 31, 2007 —Outstanding　Vested　Exercised　CanceledMarch 31, 2008 —Outstanding

Exercise priceAverage stock price at grant dateFair value price at grant date

For the year ended March 31, 2009

Non-vested

March 31, 2008 —Outstanding　Granted　Canceled　VestedMarch 31, 2009 —Outstanding

Vested

March 31, 2008 —Outstanding　Vested　Exercised　CanceledMarch 31, 2009 —Outstanding

Exercise priceAverage stock price at grant dateFair value price at grant date

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.

2006 Stock Option

2,000－－－

2,000

－－－－－

¥44,000－－

2,000－

2,000－－

－－－－－

¥44,000－－

67

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

11. INCOME TAXESThe 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:

Expenses for early retirement programAmortization of goodwillRestructuring lossOtherOther expenses —net

2009

¥ (106)(1,568)(4,423)

431¥(5,666)

2008

¥ (261)(2,183)

(1,351) 1,057

¥(2,738)

2009

$ (1,080) (15,970) (45,030)

4,390$(57,690)

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　　　TotalNet deferred tax assets

2009

¥ 41,2966,8708,9154,8051,730

11,547 (9,624)

¥ 65,541

¥(18,943) －

(1,028)¥(19,972)¥ 45,569

2008

¥ 41,0019,6965,4125,5951,344

13,286 (10,448)

¥ 65,889

¥(18,943) (3,346) (1,664)

¥(23,954)¥ 41,934

2009

$ 420,40469,94390,75948,91817,619

117,558 (97,977)

$ 667,225

$(192,846)－

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

Thousands of U.S. Dollars

Thousands of U.S. Dollars

Millions of Yen

Millions of Yen

68

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

　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:

　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:

201020112012201320142015 and thereafterTotal

¥ 198142132407866

5,164¥6,913

$ 2,0201,4531,3524,1488,819

52,580$70,375

Year Ending March 31

Deferred tax assets on land revaluation Less valuation allowance　　　TotalDeferred tax liabilities on land revaluationNet deferred tax liabilities on land revaluation difference

2009

¥ 9,019(9,019)－

(10,293)¥(10,293)

2008

¥ 9,019(9,019)－

(10,298)¥(10,298)

2009

$ 91,825(91,825)

－(104,790)

$(104,790)

Normal effective statutory tax rateExpenses not deductible for income tax purposesTax-exempt dividends receivedAmortization of goodwillEquity in earnings of affiliated companiesOther —netActual effective tax rate

2009

(41.0)%39.6 (8.2)

375.4 (74.0)

3.2 295.0 %

Thousands of U.S. Dollars

Millions of YenThousands of U.S. Dollars

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.

Millions of Yen

69

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

　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:

b. Exclusion from ConsolidationFor 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:

c. Significant Noncash Investing and Financing ActivitiesFor 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 COSTSResearch 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.

2009

AssetsLiabilities

¥2,218(860)

$22,588(8,757)

Millions of YenThousands of U.S. Dollars

AssetsLiabilities

¥10,590(5,555)

$107,818(56,551)

Millions of YenThousands of U.S. Dollars

2008

AssetsLiabilities

¥1,352(310)

Millions of Yen

70

14. LEASESThe Group leases certain structures, computer equipment and other assets.

Obligations under finance leases and future minimum payments under noncancelable operating leases were as follows:

Pro forma information for the year ended March 31, 2008Pro 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:

　The above acquisition cost included related interest expenses.

　Obligations under finance leases:

　Depreciation expense, interest expense under finance leases:

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

2008

¥2,2613,252

¥5,514

Due within one yearDue after one yearTotal

2008

¥2,746¥2,746

Depreciation expenseLease payments

Total

¥12,213(6,699)

¥ 5,514

Software

¥ 2,553(1,575)

¥ 978

Equipmentand

Other

¥ 9,608(5,095)

¥ 4,512

Buildingsand

Structures

¥ 51

(29)

¥ 22

Acquisition costAccumulated depreciationNet leased property

2008

Millions of Yen

Millions of Yen

Millions of Yen

Due within one yearDue after one yearTotal

Operating leases

¥ 3,85422,244

¥26,098

Finance leases

¥1,8702,286

¥4,157

Operating leases

$ 39,242226,449

$265,692

Finance leases

$19,04523,274

$42,319

2009

Millions of Yen

2009

Thousands of U.S. Dollars

71

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

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

　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 company’s financial data is presented below. The company’s stock is listed on Euronext Paris.

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.

Note: This summary shows consolidated financial data. “Income of consolidated companies before taxes” includes income before income taxes and minority interests.

2009

－－－

2008

¥2,0353,378

49

2009

－－－

SalesPurchasesNonoperating transaction

Thousands of U.S. Dollars

2009

－－－

2008

¥ 33101

5

2009

－－－

Trade accounts receivableTrade accounts payableOther payable

Thousands of U.S. Dollars

Amount (Millions of Euros)At December 31, 2008

6,6575,203

7,4962,014

2,350

Current assetsNon-current assets

Current liabilitiesNon-current liabilities

Total equity

January 1, 2008 toDecember 31, 2008

4,704

672447

RevenueIncome of consolidated companies before taxesNet income attributable to equity holders of the parent

Millions of Yen

Millions of Yen

72

16. DERIVATIVESThe 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:

Foreign currency forward contracts: To buy foreign currencies

To sell foreign currencies

Currency options To buy foreign currencies

To sell foreign currencies

ContractAmount

¥3,495969385

2,192317

19

¥ 82[5]

164[5]

Currency

USDEUR

OtherUSDEUR

Other

USD

USD

FairValue

¥3,4351,064

4002,210

25920

¥ 4

7

UnrealizedGain (Loss)

¥(59)9414

(18)58(1)

¥ (0)

(1)

Millions of Yen

2009

Foreign currency forward contracts: To buy foreign currencies

To sell foreign currenciesCurrency options To buy foreign currencies

To sell foreign currencies

ContractAmount

¥5,827168

303,092

¥ 695[32]

1,356[34]

Currency

USDEUR

OtherUSD

USD

USD

FairValue

¥5,534170

273,009

¥ 21

66

UnrealizedGain (Loss)

¥(292)1

(2)82

¥ (11)

(32)

Millions of Yen

2008

73

　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 Group’s 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 LIABILITIESAt March 31, 2009, the Group had the following contingent liabilities:

18. NET INCOME (LOSS) PER SHAREBasic 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:

Foreign currency forward contracts: To buy foreign currencies

To sell foreign currencies

Currency options To buy foreign currencies

To sell foreign currencies

ContractAmount

$35,5809,8693,922

22,3163,234

195

$ 838[55]

1,677[57]

Currency

USDEUR

OtherUSDEUR

Other

USD

USD

FairValue

$34,97610,836

4,07322,503

2,638206

$ 45

72

UnrealizedGain (Loss)

$(603)967151

(187)596(11)

$ (9)

(15)

Thousands of U.S. Dollars

2009

Guarantees of loans or other liabilities ¥10,265 $104,506

Thousands of U.S. DollarsMillions of Yen

Year Ended March 31, 2009

Basic EPS:　Net loss available to common shareholders

¥(79.61)

$(0.81)

Weighted-average Shares

256,931

Net Loss

¥(20,453)

U.S. DollarsThousands of SharesMillions of Yen Yen

EPS

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 Group’s net loss position.

74

19. SEGMENT INFORMATIONThe 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:

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

Year Ended March 31, 2008

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

EPS

¥132.03

¥128.05

Weighted-average Shares

274,539

－－

100100

274,639

Net Income

¥36,246

01,079

－1,079

¥35,166

Thousands of SharesMillions of Yen Yen

Sales to customersIntersegment sales　　　 Total salesOperating expensesOperating income

Consolidated

¥1,887,170－

1,887,1701,843,986

¥ 43,184

OtherBusiness

¥23,80514,56538,37136,647

¥ 1,723

InformationServices

¥63,15011,99875,14871,255

¥ 3,893

Advertising

¥1,800,214946

1,801,1601,767,236

¥ 33,924

Total assetsDepreciationImpairment lossCapital expenditures

Consolidated

¥1,092,54318,001

1,40512,674

Eliminations/Corporate

¥(147,746) (1,597)－

(793)

OtherBusiness

¥104,658752－

198

InformationServices

¥59,7013,096－

5,888

Advertising

¥1,075,92915,749

1,4057,381

Millions of Yen

2009

Millions of Yen

2009

Eliminations/Corporate

－¥(27,510)

(27,510)(31,153)

¥ 3,643

75

(1) Sales and operating income:

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

(1) Sales and operating income:

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

Sales to customersIntersegment sales　　　 Total salesOperating expensesOperating income

Consolidated

$19,211,753－

19,211,75318,772,127

$ 439,625

OtherBusiness

$242,347148,280390,628373,082

$ 17,545

InformationServices

$642,884122,144765,028725,395

$ 39,632

Advertising

$18,326,5209,635

18,336,15617,990,801

$ 345,355

Total assetsDepreciationImpairment lossCapital expenditures

Consolidated

$11,122,303183,256

14,305129,024

Eliminations/Corporate

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

－(8,076)

OtherBusiness

$1,065,4427,658－

2,017

InformationServices

$607,77531,524－

59,941

Advertising

$10,953,168160,333

14,30575,142

Thousands of U.S. Dollars

2009

Thousands of U.S. Dollars

2009

Eliminations/Corporate

－$(280,060)

(280,060)(317,152)

$ 37,091

Sales to customersIntersegment sales　　　 Total salesOperating expensesOperating income

Consolidated

¥2,057,554－

2,057,5542,001,427

¥ 56,126

OtherBusiness

¥102,08329,114

131,197128,136

¥ 3,060

Advertising

¥1,955,471 1,564

1,957,0351,907,155

¥ 49,880

Total assetsDepreciationImpairment lossCapital expenditures

Consolidated

¥1,251,91216,000

7212,197

Eliminations/Corporate

¥(191,894)(1,512)－

(1,197)

OtherBusiness

¥196,3482,262

333,486

Advertising

¥1,247,45815,250

399,908

Eliminations/Corporate

－¥(30,678)

(30,678)(33,864)

¥ 3,185

Millions of Yen

2008

Millions of Yen

2008

Note: Change in business segmentationAlthough 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.

76

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:

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

(1) Sales and operating income:

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

Sales to customersIntersegment sales　　　 Total salesOperating expensesOperating income

Consolidated

¥1,887,170－

1,887,1701,843,986

¥ 43,184

OtherBusiness

¥ 86,95626,418

113,375107,742

¥ 5,633

Advertising

¥1,800,214946

1,801,1601,767,236

¥ 33,924

Total assetsDepreciationImpairment lossCapital expenditures

Consolidated

¥1,092,54318,001

1,40512,674

Eliminations/Corporate

¥(147,716)(1,584)－

(793)

OtherBusiness

¥164,3303,836－

6,086

Advertising

¥1,075,92915,749

1,4057,381

Eliminations/Corporate

－¥(27,365)

(27,365)(30,992)

¥ 3,626

Millions of Yen

2009

Millions of Yen

2009

Sales to customersIntersegment sales　　　 Total salesOperating expensesOperating income

Consolidated

$19,211,753－

19,211,75318,772,127

$ 439,625

OtherBusiness

$ 885,232268,950

1,154,1821,096,835

$ 57,346

Advertising

$18,326,5209,635

18,336,15617,990,801

$ 345,355

Total assetsDepreciationImpairment lossCapital expenditures

Consolidated

$11,122,303183,256

14,305129,024

Eliminations/Corporate

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

－(8,076)

OtherBusiness

$1,672,91239,057－

61,959

Advertising

$10,953,168160,333

14,30575,142

Eliminations/Corporate

－$(278,585)

(278,585)(315,509)

$ 36,923

Thousands of U.S. Dollars

2009

Thousands of U.S. Dollars

2009

77

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

c. Sales to Foreign CustomersSales 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.

Note: “Others” consists substantially of the United States of America and China.

Note: “Others” consists substantially of the United States of America and China.

Sales to customersInterarea transfer　　　 Total salesOperating expensesOperating incomeTotal assets

Consolidated

¥1,887,170－

1,887,1701,843,986

¥ 43,184¥1,092,543

Others

¥165,43412,975

178,410174,342

¥ 4,067¥152,844

Japan

¥1,721,7351,858

1,723,5941,684,337

¥ 39,257¥ 942,751

Eliminations/Corporate

－¥(14,834)

(14,834)(14,693)

¥ (141)¥ (3,051)

Millions of Yen

2009

Sales to customersInterarea transfer　　　 Total salesOperating expensesOperating incomeTotal assets

Consolidated

¥2,057,554－

2,057,5542,001,427

¥ 56,126¥1,251,912

Others

¥181,95514,751

196,706196,453

¥ 253¥213,841

Japan

¥1,875,5981,991

1,877,5901,821,785

¥ 55,804¥1,043,948

Eliminations/Corporate

－¥(16,742)

(16,742)(16,811)

¥ 68¥ (5,876)

Millions of Yen

2008

Sales to customersInterarea transfer　　　 Total salesOperating expensesOperating incomeTotal assets

Consolidated

$19,211,753－

19,211,75318,772,127

$ 439,625$11,122,303

Others

$1,684,156132,095

1,816,2521,774,839

$ 41,412$1,555,986

Japan

$17,527,59618,924

17,546,52117,146,870

$ 399,650$ 9,597,385

Eliminations/Corporate

－$(151,019)

(151,019)(149,582)

$ (1,437)$ (31,068)

Thousands of U.S. Dollars

2009

78

20. SUBSEQUENT EVENTSa. Appropriation of Retained EarningsThe Board of Directors have proposed the following appropriation of retained earnings at March 31, 2009, which was subject to approval at the Company’s shareholders’ meeting to be held on June 26, 2009:

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 ExchangeAdvertising 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 ratioThe 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 exchangeJuly 31, 2009

Millions of YenThousands of U.S. Dollars

Year-end cash dividends, ¥15 ($0.15) per share $37,904¥3,723

79

Non-Consolidated Financial SummaryDentsu Inc.Years Ended March 31

For the year:Net salesCost of salesGross profitSelling, general and administrative expenses Operating incomeIncome (loss) before income taxes Net income (loss)At year-end: Total assetsTotal equityPer 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)

Notes: (1)U.S. dollar amounts have been translated from yen at the rate of ¥98.23 = US$1, the approximate exchange rate prevail ing 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

2005 2006 2007 2008

Millions of yenexcept per share data

2009

Thousands of U.S. dollars(1)

except per share data2009

¥1,531,9391,318,289

213,649

171,93241,71746,73226,321

¥1,105,635448,276

¥ 15

9,748.289,740.55

19.56.03.8

40.515.4

¥1,577,1311,362,987

214,144

174,92939,21445,07621,537

¥1,102,001464,524

¥ 25

7,901.977,892.39

18.34.73.6

42.231.3

¥1,602,0621,385,322

216,739

178,24238,49639,70722,243

¥1,135,805487,345

¥ 30

8,111.368,103.44

17.84.73.4

42.937.0

¥1,585,9821,369,289

216,692

180,41036,28138,86524,533

¥1,112,758491,819

¥ 35

8,936.068,932.81

16.75.03.2

44.239.2

¥1,447,4101,254,694

192,716

168,84523,870

(25,466)(32,771)

¥ 986,741383,028

¥ 35

(127.55)ー

12.4(7.5)2.3

38.8ー

$14,734,91512,773,0281,961,887

1,718,877243,010

(259,252)(333,624)

$ 10,045,2143,899,297

$ 0.36

(1.30)ー

ー

ー

ー

ー

ー

Gross Profit

2009

(Billions of yen)

(Billions of yen)

0

20

40

60

80

2009

Net Sales

(Billions of yen)

0

2,000

2009

(%)

0

4

8

2009

(Billions of yen)

0

20

40

-8

-4

-40

-20

0

500

1,000

1,500

0

240

0

60

120

180

2005 2006 2007 2008 2005 2006 2007 2008

2005 2006 2007 2008 2005 2006 2007 2008

(%)

12

18

24

0

6

(Years Ended March 31)

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

82

Others 25.8%

Beverages/Cigarettes 10.0%

Information/Communications 14.8%

Cosmetics/Toiletries 7.3%

Automobiles/Related Products 7.2%

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

Pharmaceuticals/Medical Supplies 5.4%

Distribution/Retailing 5.3%

Hobbies/Sporting Goods 5.2%

Content Services 5.7%

Marketing/Promotion 11.8%

Television Spots 24.2%

Television Time 23.7%

Others 1.9%

Newspapers 10.1%Magazines 4.1%

Radio 1.5%

OOH Media 2.9%

Creative 12.3%

Interactive Media 1.8%

Net Income (Loss), Return on Equity (ROE)Net income (loss) Return on equity (ROE)

Operating Income, Operating MarginOperating income Operating margin

83

Sales(Years ended March 31)

Years ended March 31 2005 2006 2007 2008 2009

Television ¥ 749,349 48.9% ¥ 750,302 47.6% ¥ 748,856 46.7% ¥ 734,205 46.3% ¥ 692,992 47.9%　Time 346,135 22.6 347,147 22.0 357,603 22.3 348,098 21.9 343,431 23.7　Spot 403,214 26.3 403,155 25.6 391,252 24.4 386,107 24.3 349,561 24.2Newspapers 203,314 13.3 197,745 12.5 193,731 12.1 181,545 11.4 146,766 10.1Magazines 72,514 4.7 74,670 4.7 73,703 4.6 69,914 4.4 60,010 4.1Radio 26,289 1.7 25,844 1.6 24,746 1.5 23,704 1.5 22,014 1.5Interactive Media(1) 11,293 0.7 18,767 1.2 21,545 1.3 23,990 1.5 26,220 1.8OOH Media(2) 37,445 2.4 36,152 2.3 43,075 2.7 48,904 3.1 42,056 2.9Creative 165,099 10.8 171,008 10.8 188,230 11.7 198,792 12.5 177,438 12.3Marketing/Promotion 172,518 11.3 185,266 11.7 173,321 10.8 179,051 11.3 170,868 11.8Content Services(3) 76,838 5.0 92,089 5.8 109,980 6.9 100,578 6.3 82,104 5.7Others 17,276 1.1 25,283 1.6 24,871 1.6 25,294 1.6 26,938 1.9Total ¥ 1,531,939 100.0% ¥ 1,577,131 100.0% ¥ 1,602,062 100.0% ¥ 1,585,982 100.0% ¥ 1,447,410 100.0%

0

1,000,000

1,500,000

2,000,000

(Millions of yen)

500,000

Net Sales by Business Category (Non-Consolidated)

● Time　● Spot　● Newspapers　● Magazines　● Radio　● Interactive Media　● OOH Media

● Creative　● Marketing/Promotion　● Content Services　● Others

20092005 2006 2007 2008

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.

Millions of yen

84

Years ended March 31 2005 2006 2007 2008 2009

Information/Communications ¥ 198,782 13.0% ¥ 204,243 13.0% ¥ 240,657 15.0% ¥ 227,675 14.4% ¥ 214,144 14.8%Beverages/Cigarettes 161,674 10.6 156,944 10.0 157,784 9.8 152,749 9.6 144,963 10.0Cosmetics/Toiletries 136,179 8.9 130,240 8.3 121,126 7.6 117,011 7.4 106,299 7.3Automobiles/Related Products 134,895 8.8 130,968 8.3 130,130 8.1 123,701 7.8 103,493 7.2Finance/Insurance 111,409 7.3 144,237 9.1 133,429 8.3 123,375 7.8 99,716 6.9Foodstuffs 85,277 5.6 84,793 5.4 86,894 5.4 88,300 5.6 88,752 6.1Home Electric Appliances/AV Equipment 71,707 4.7 110,826 7.0 106,876 6.7 91,677 5.8 85,920 5.9Pharmaceuticals/Medical Supplies 73,617 4.8 76,755 4.9 75,623 4.7 85,057 5.4 78,508 5.4Distribution/Retailing 69,175 4.5 73,134 4.6 79,788 5.0 77,683 4.9 76,505 5.3Hobbies/Sporting Goods 44,555 2.9 50,907 3.2 56,939 3.6 73,067 4.6 75,211 5.2Others 444,665 29.0 414,081 26.3 412,812 25.8 425,682 26.8 373,893 25.8Total ¥ 1,531,939 100.0% ¥ 1,577,131 100.0% ¥ 1,602,062 100.0% ¥ 1,585,982 100.0% ¥ 1,447,410 100.0%

0

1,000,000

1,500,000

2,000,000

(Millions of yen)

500,000

Net Sales by Industry (Non-Consolidated)

● 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

20092005 2006 2007 2008

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.

Millions of yen

Market Data(Calendar years)

(Billions of yen)

0

(%)

0

8,000 1.6

2008

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

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

2004 2005 2006 2007

4,000

2,000

6,000

0.4

0.8

1.2

0

200,000

300,000

400,000

500,000

(Millions of U.S. dollars)

100,000

Size of Major Advertising Markets

● United States　● Japan　● Germany　● United Kingdom　● China　● France　

● Rest of Europe　● Rest of Asia-Pacific　● Latin America　● Others

20082004 2005 2006 2007

405,304.0427,677.8

458,137.9488,943.8 494,744.4

　

2004 　2005 2006 2007 2008

United States $161,487.1 39.8% $166,234.9 38.9% $174,837.9 38.2% $179,251.1 36.7% $171,913.0 34.7%Japan 42,206.8 10.4% 45,911.4 10.7% 46,419.3 10.1% 46,762.8 9.6% 44,946.8 9.1%Germany 23,695.5 5.8% 24,795.0 5.8% 26,404.1 5.8% 27,628.1 5.7% 27,540.3 5.6%United Kingdom 21,133.2 5.2% 21,789.4 5.1% 22,145.1 4.8% 23,553.7 4.8% 22,810.1 4.6%China 10,419.6 2.6% 12,134.2 2.8% 14,590.4 3.2% 16,901.0 3.5% 20,073.8 4.1%France 13,630.4 3.4% 13,870.2 3.2% 14,474.4 3.2% 14,928.3 3.1% 14,946.4 3.0%Rest of Europe 70,818.3 17.5% 72,392.4 16.9% 80,318.8 17.5% 90,345.4 18.5% 93,679.1 18.9%Rest of Asia-Pacific 32,771.9 8.1% 35,077.5 8.2% 37,687.3 8.2% 41,406.2 8.5% 43,363.4 8.8%Latin America 14,389.8 3.6% 18,592.0 4.3% 21,472.7 4.7% 25,109.5 5.1% 28,884.7 5.8%Others 14,751.3 3.6% 16,880.9 3.9% 19,787.9 4.3% 23,057.7 4.7% 26,586.9 5.4%Total $405,304.0 100.0% $427,677.8 100.0% $458,137.9 100.0% $488,943.8 100.0% $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

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

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

Size of Major Advertising Markets

85

Millions of U.S. dollars at current prices

Billions of yen

Previous Category New Category

　　　　

2004 2005 2006 2007 2008

Advertising expenditures in Japan ¥ 5,857.1 ¥ 6,823.5 ¥ 6,939.9 ¥ 7,019.1 ¥ 6,692.6Nominal GDP 498,328.4 501,734.4 507,364.8 515,804.9 507,371.3Advertising expenditures in Japan as a percentage of nominal GDP 1.18% 1.36% 1.37% 1.36% 1.32%

　　　　

2004 2005 2006 2007 2008

Energy/Materials/Machinery ¥ 47.2 1.3% ¥ 50.1 1.3% ¥ 56.2 1.5% ¥ 64.0 1.8% ¥ 48.7 1.5%Foodstuffs 301.7 8.2 302.3 8.1 298.9 8.2 299.3 8.4 301.4 9.1Beverages/Cigarettes 287.6 7.8 282.2 7.5 276.5 7.5 263.7 7.4 246.8 7.5Pharmaceuticals/Medical Supplies 176.9 4.8 184.5 4.9 177.9 4.9 182.8 5.1 183.6 5.6Cosmetics/Toiletries 379.1 10.3 326.0 8.7 319.3 8.7 311.4 8.7 293.8 8.9Apparel/Fashion Accessories/Personal Items 96.5 2.6 110.7 3.0 123.2 3.4 127.8 3.6 115.8 3.5Precision Instruments/Office Supplies 47.4 1.3 40.8 1.1 42.3 1.2 44.6 1.2 40.8 1.2Home Electric Appliances/AV Equipment 82.4 2.3 90.7 2.4 91.9 2.5 85.0 2.4 81.8 2.5Automobiles/Related Products 254.9 6.9 248.2 6.6 235.0 6.4 216.9 6.1 192.2 5.8Household Products 66.9 1.8 67.6 1.8 62.5 1.7 63.8 1.8 61.0 1.8Hobbies/Sporting Goods 142.3 3.9 162.7 4.4 165.2 4.5 156.9 4.4 169.2 5.1Real Estate/Housing Facilities 155.9 4.2 166.0 4.4 166.8 4.5 173.0 4.8 147.5 4.5Publications 151.3 4.1 148.2 4.0 143.1 3.9 137.1 3.8 114.1 3.5Information/Communications 266.4 7.3 267.7 7.2 268.5 7.3 266.7 7.5 241.4 7.3Distribution/Retailing 254.8 6.9 253.9 6.8 234.8 6.4 223.4 6.3 210.6 6.4Finance/Insurance 291.2 7.9 327.2 8.8 304.7 8.3 246.2 6.9 212.9 6.4Transportation/Leisure 284.5 7.7 288.1 7.7 288.0 7.9 289.7 8.1 269.4 8.2Food Services/Other Services 124.0 3.4 147.3 3.9 148.4 4.0 151.8 4.3 144.2 4.4Government/Organizations 46.8 1.3 52.3 1.4 43.6 1.2 54.1 1.5 45.5 1.4Education/Medical Services/Religion 130.9 3.6 136.7 3.7 128.8 3.5 119.2 3.3 100.1 3.0Classified Ads/Others 86.3 2.4 86.7 2.3 90.5 2.5 91.5 2.6 77.7 2.4Total ¥3,676.0 100.0% ¥3,740.8 100.0% ¥3,666.8 100.0% ¥3,569.9 100.0% ¥3,299.5 100.0%

　　　

2004 2005 2006 2007 2008

Television ¥2,043.6 34.9% ¥2,041.1 29.9% ¥2,016.1 29.0% ¥1,998.1 28.5% ¥1,909.2 28.5%Newspapers 1,055.9 18.0 1,037.7 15.2 998.6 14.4 946.2 13.5 827.6 12.4Magazines(1) 397.0 6.8 484.2 7.1 477.7 6.9 458.5 6.5 407.8 6.1Radio 179.5 3.1 177.8 2.6 174.4 2.6 167.1 2.4 154.9 2.3Satellite Media-Related(1) 43.6 0.7 48.7 0.7 54.4 0.8 60.3 0.8 67.6 1.0Internet 181.4 3.1 377.7 5.6 482.6 6.9 600.3 8.6 698.3 10.4Promotional Media(1) 1,956.1 33.4 2,656.3 38.9 2,736.1 39.4 2,788.6 39.7 2,627.2 39.3Total(1) ¥5,857.1 100.0% ¥6,823.5 100.0% ¥6,939.9 100.0% ¥7,019.1 100.0% ¥6,692.6 100.0%

Advertising Expenditures in the Four Major Media in Japan by Industry

Advertising Expenditures in Japan by Medium

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

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

Billions of yen

Billions of yen

Previous Category New Category

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

0

3,500,000

(Millions of yen)

Net Sales of the Top 10 Advertising Companies in Japan(Non-Consolidated)

● Dentsu　● Hakuhodo　● Asatsu-DK　● Daiko Advertising　● Tokyu Agency　● East Japan Marketing & Communications

● Yomiko Advertising　● Delphys　● Asahi Advertising　● Frontage

20082004 2005 2006 2007

　　　　Calendar years 2004 2005 2006 2007 2008

Dentsu ¥1,505,234 ¥1,559,149 22.8% ¥1,606,759 23.2% ¥1,588,769 22.6% ¥1,499,154 22.4%Hakuhodo 674,631 705,250 10.3 714,391 10.3 716,975 10.2 705,751 10.5Asatsu-DK 373,897 384,849 5.6 378,804 5.5 387,860 5.5 358,596 5.4Daiko Advertising 144,466 145,901 2.1 136,092 2.0 137,947 2.0 138,622 2.1Tokyu Agency 137,781 124,656 1.8 123,175 1.8 121,971 1.7 116,387 1.7East Japan Marketing & Communications 89,066 96,203 1.4 101,993 1.5 109,794 1.6 104,159 1.6Yomiko Advertising 107,331 102,119 1.5 90,522 1.3 98,025 1.4 89,489 1.3Delphys 67,640 78,541 1.2 61,447 0.9 60,768 0.9 55,723 0.8Asahi Advertising 57,756 57,000 0.8 57,011 0.8 57,984 0.8 51,578 0.8Frontage 45,195 48,589 0.7 50,645 0.7 43,398 0.6 44,249 0.7Reference: Advertising Expenditures in Japan (Billions of yen) － ¥ 6,823.5 100.0% ¥ 6,939.9 100.0% ¥ 7,019.1 100.0% ¥ 6,692.6 100.0%

Net Sales

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 Institute’s 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 Dentsu’s Advertising Expenditures in Japan.

87

Millions of yen

500,000

1,000,000

1,500,000

2,000,000

(Millions of yen)

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

● Dentsu　● Hakuhodo　● Asatsu-DK　● Daiko Advertising　● Tokyu Agency　● East Japan Marketing & Communications

● Yomiko Advertising　● Delphys　● Asahi Advertising　● Frontage

20082004 2005 2006 20070

2,500,000

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 Institute’s 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 Dentsu’s Advertising Expenditures in Japan.

　　　　Calendar years 2004 2005 2006 2007 2008

Dentsu ¥1,045,664 ¥1,033,490 27.6% ¥1,051,129 28.7% ¥1,011,403 28.3% ¥959,619 29.1%Hakuhodo 449,971 449,362 12.0 457,287 12.5 451,684 12.7 416,504 12.6Asatsu-DK 240,311 240,753 6.4 241,300 6.6 244,976 6.9 220,278 6.7Daiko Advertising 91,416 94,595 2.5 90,149 2.5 90,376 2.5 90,338 2.7Tokyu Agency 58,966 52,405 1.4 48,585 1.3 47,933 1.3 45,575 1.4East Japan Marketing & Communications 11,594 12,649 0.3 12,291 0.3 15,442 0.4 12,685 0.4Yomiko Advertising 59,990 55,844 1.5 49,652 1.4 50,293 1.4 44,077 1.3Delphys 36,540 35,515 0.9 26,920 0.7 25,153 0.7 21,864 0.7Asahi Advertising 39,554 38,657 1.0 37,607 1.0 36,806 1.0 32,007 1.0Frontage 33,443 36,651 1.0 35,831 1.0 29,028 0.8 31,230 0.9Reference: Advertising Expenditures in Japan (Billions of yen) － ¥ 3,740.8 100.0% ¥ 3,666.8 100.0% ¥ 3,569.9 100.0% ¥ 3,299.5 100.0%

Four Mass Media

88

Millions of yen

1901　　Hoshiro Mitsunaga establishes Japan Advertising Ltd. and Telegraphic Service Co.

1906　　Telegraphic Service becomes Japan Telegraphic Communication Co., Ltd.

1907　　Japan Advertising merges with Japan Telegraphic Communication and starts to engage in 　

　　　　communication and advertising operations.

1936　　Japan Telegraphic Communication relinquishes its news services department to Domei News

　　　　Agency and relaunches itself as a specialized advertising agency.

1943　　The Company acquires 16 companies in a move to augment its advertising agency business.

　　　　Operational bases are established in Tokyo, Osaka, Nagoya and Kyushu.

1947　　Hideo Yoshida becomes the fourth President.

　　　　The Dentsu Advertising Awards are created.

1949　　The Dentsu Advertising Essay Contest for Students is established.

1951　　Dentsu establishes the Radio Division at its head office and local offices. Commercial radio

　　　　broadcasting begins in Japan.

1953　　Dentsu creates the Radio and Television Division at its head office and the Osaka office.

　　　　Commercial television broadcasting begins.

1955　　Dentsu Advertising Ltd. becomes the new company name.

1967　　The Tsukiji Head Office Building is completed.

1974　　Advertising Age ranks Dentsu the No. 1 advertising agency worldwide in terms of billings in

　　　　calendar year 1973.

1981　　The company formerly known as JIMA Dentsu Advertising, Ltd., and U.S. partner Young &

　　　　Rubicam’s Japanese affiliate establish Dentsu Young & Rubicam as a joint venture in Tokyo.

1984　　Dentsu and U.S.-based Young & Rubicam jointly establish DYR, an international service network.

1988　　Advertising Age names Dentsu the 1987 International Agency of the Year.

1989　　Net sales exceed ¥1 trillion in the fiscal year ended March 31, 1989.

1993　　Yutaka Narita becomes the ninth President.

1995　　Dentsu establishes five domestic regional subsidiaries.

1996　　The Japan–China Advertising Education Exchange Project commences.

　　　　Dentsu Actis (Tokyo) and three other Group companies merge to form Dentsu Tec Inc.

　　　　Cyber Communications Inc. is established.

1997　　Dentsu Tec lists its shares on the over-the-counter market (now, JASDAQ).

2000　　Dentsu 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.

2001　　Dentsu commemorates the 100th anniversary of its establishment and lists its shares on

　　　　the First Section of the Tokyo Stock Exchange.

2002　　Tateo Mataki becomes the 10th President.

　　　　The BCOM3 Group merges with Publicis Groupe S.A.

　　　　Dentsu acquires a capital position in the Publicis Groupe.

　　　　Dentsu’s new Shiodome Head Office Building is completed.

2003　　Dentsu 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.

2004　　Dentsu Hokkaido Inc. and Ad Dentsu Hokkaido Inc. merge, with Dentsu Hokkaido as

　　　　the surviving company.

　　　　Dentsu Cayenne Holdings Ltd. is established.

2005　　Dentsu Group obtains BS7799 certification and Information Security Management Systems

　　　　(ISMS) certification.

　　　　All of Dentsu’s 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.

2006　　Dentsu Tec is converted to a wholly owned subsidiary and its shares are delisted.

2007　　Net 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)

2008　　Dentsu obtains approximately ¥60 billion of treasury stock.

　　　　Dentsu Holdings USA, Inc. acquires McGarry Bowen, LLC of the United States.

　　　　Dentsu establishes Dentsu-Smart.

89

History

Name Geographic Area

Beijing Dentsu Advertising Co., Ltd. China 70.0

Dentsu (Thailand) Ltd. Thailand 100.0 (98.4)

Dentsu Media (Thailand) Ltd. Thailand 100.0　 (51.0)

Media Palette (Taiwan) Inc. Taiwan 100.0　 (30.0)

Dentsu Innovak Inc. Republic of Korea 85.0

and 101 other companies

Affiliated Companies Accounted for under the Equity Method

Ad Gear Ltd. Japan 34.0

Frontage Inc. Japan 40.0

Beacon Communications K.K. Japan 34.0

Video Research Ltd. Japan 34.2

OPT, Inc. Japan 35.1　 (0.0)

D2 Communications Inc. Japan 46.0

Publicis Groupe S.A.(2)　 France 15.0

DCTP Entwicklungs-

gesellschaft für TV-Programm mbH Germany 37.5

Phoenix Communications Inc. Republic of Korea 33.0

PDS Media, Inc. Republic of Korea 33.3

and 19 other companies

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.

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

Equity Held by Dentsu (Equity Held Indirectly) (%)

Equity Held by Dentsu (Equity Held Indirectly) (%)Name Geographic Area

Consolidated Subsidiaries

Dentsu East Japan Inc. Japan 100.0

Dentsu West Japan Inc. Japan 100.0

Dentsu Kyushu Inc. Japan 100.0

Dentsu Hokkaido Inc. Japan 100.0

Dentsu Meitetsu Communications Inc.(1)　 　Japan 50.0

Dentsu Young & Rubicam Inc. Japan 51.0

Cyber Communications Inc. Japan 86.0

Dentsu search & link INC. Japan 75.0 (51.0)

The Goal Inc. Japan 77.8

Dentsu Tec Inc. Japan 100.0

Dentsu Public Relations Inc. Japan 100.0

Dentsu Casting and Entertainment Inc. Japan 100.0

Dentsu Operations Development Inc. Japan 100.0 (56.0)

Dentsu Table Media Communications Inc.　 Japan 95.0 (95.0)

Information Services International-Dentsu, Ltd. Japan 61.9 (0.0)

Brainyworks, Ltd. Japan 100.0 (100.0)

Dentsu Facility Management Inc. Japan 100.0

Dentsu Holdings USA, Inc. U.S.A. 100.0

Dentsu America, Inc. U.S.A. 100.0 (100.0)

Dentsu Latin America Propaganda S/A 　Brazil 51.0

90

(As of March 31, 2009)

Subsidiaries andAffiliates

* Simultaneously serving as Executive Officer.

91

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

Board of Directors, Corporate Auditorsand Executive Officers(As of August 27, 2009)

92

Japanese financial institutions 123 69,974,011 25.15

Japanese securities firms 27 2,838,009 1.02

Other Japanese corporations 649 83,580,311 30.04

Treasury stock 1 29,960,751 10.77

Japanese individuals and others 41,415 63,618,517 22.87

Foreign institutions and individuals 387 28,212,401 10.14

Total 42,602 278,184,000 100.00

Breakdown of Shareholders by Type

Dentsu Inc. 29,960,751 10.77

Kyodo News 20,488,800 7.37

Jiji Press, Ltd. 19,748,680 7.10

The Master Trust Bank of Japan, Ltd. (Trust accounts) 12,235,600 4.40

Mizuho Corporate Bank, Ltd. 11,328,880 4.07

Japan Trustee Services Bank, Ltd. (Trust accounts 4G) 9,552,500 3.43

Japan Trustee Services Bank, Ltd. (Trust accounts) 8,918,500 3.21

Group Employees' Stockholding Association 8,182,778 2.94

Yoshida Hideo Memorial Foundation 4,984,808 1.79

Recruit Co., Ltd. 4,929,900 1.77

Corporate Headquarters

1-8-1, Higashi-Shimbashi, Minato-ku, Tokyo 105-7001, Japan

Phone: +81-3-6216-5111

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

Major Shareholders

Number ofShares Held

Percentage ofTotal Number of

Shares Issued

Number ofShares Held

Number ofShareholders

Percentage ofTotal Number of

Shares Issued

(As of March 31, 2009)

Information for Shareholders