The internal control system exists to encourage voluntary control by Executive Directors, Executive Officers and employees. The system is designed to ensure that the Company meets its social responsibilities as “A Partner in Creating Value.” To ensure that Executive Directors, Executive Officers and employees comply with all laws, regulations and the Articles of Incorporation during the course of their duties and to prevent the formation of any relationships outside the accepted code of conduct, we have established the Dentsu Group Charter of Corporate Conduct to define the sphere of common activities. The Corporate Ethics Committee, chaired by the Vice President, is charged with creating, operating and improving the internal control system.

1. Compliance System for Executive Directors, Executive Officers, and Employees

To establish and improve compliance systems for employees, a department working under the direction of the Corporate Ethics Committee, has been charged with the development of appropriate regulations and manuals, and the implementation of training programs. Internal audits are performed by the Internal Audit Division, which reports directly to the President.

To encourage the reporting of legal violations or other compliance issues, Dentsu has instituted and operates D-EAR, an internal reporting and proposal system. Whenever a corporate auditor offers a recommendation or proposal for the improvement of our compliance systems, the Executive Directors and Executive Officers are responsible for implementing the necessary improvements without delay.

2. Systems to Ensure the Execution of Business by Executive Directors and Executive Officers

The Board of Directors meets on a monthly basis so that Executive Directors can perform their business tasks efficiently. In addition, a meeting of full-time Executive Directors is held twice a month to deliberate important matters of management policy or strategy, followed by decision-making on actionable tasks. Separately, various committees whose membership is primarily Executive 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 other 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 the committees are quickly delegated to individual Executive Directors and Managing Directors 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.

3. Information Management and Storage System for Executive Directors and Executive Officers

Information concerning the execution of business duties by Executive Directors and Executive Officers is stored and managed appropriately, in accordance with the Company's documentation management regulations and information management guidelines.

4. Risk Management Systems

To mitigate and reduce risk-related damage to a minimum, Dentsu carries out an annual internal risk assessment to identify all significant risks. Risk management regulations have been drawn up company-wide and departmental risk management systems have been established to prevent the identified risks from occurring, and to cope with any events that may take place. Risks are prioritized in order of severity and detailed response plans are drawn up and implemented as required. In addition, the Internal Control Promotion Project Team, under the direction of the Corporate Ethics Committee, carries out independent evaluations of the Company's risk management status to develop and improve risk management systems.

5. Internal Structure to Support the Outside Auditors and their Independent Status

Positioned as the internal structure to support outside Auditors, Dentsu's Corporate Auditors Office reports directly to the auditors' committee, maintaining its independence from the Company's Executive Directors and Executive Officers.

6. System of Reporting to Corporate Auditors and Improving Audit Effectiveness

Policies are in place to define items that Executive Directors and Executive Officers must report to Corporate Auditors. Executive Directors, Executive Officers and employees 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, regulations have been established that require Executive Directors, Executive Officers and employees to provide such reports without delay. To enhance audit effectiveness, any such requests may be communicated through the Internal Audit Division or the Independent Auditors.

7. Internal Control System for the Dentsu Group, including Subsidiaries

The Dentsu Group Charter of Corporate Conduct was established to serve as a guideline for the entire Dentsu Group, including its subsidiaries, each of which has decided independently to adopt this Charter. This Charter also establishes guidelines with regard to various systems that its subsidiaries, as members of the Dentsu Group, should implement and operate. Subsidiaries establish their own regulations based on these guidelines, and construct, operate and improve their internal control systems to ensure proper internal and external transactions in all corporate Group companies.

8. System to Ensure Appropriate Financial Reporting

The Internal Control Promotion Project Team, working under the supervision of the Corporate Ethics Committee, has been charged with creating effective internal controls to ensure appropriate financial reporting. Dentsu also conducts evaluations based on internal checks and audits conducted by corporate auditors.