Basic Policy on Internal Control of Dentsu Group

1. System to Ensure the Appropriateness of Operations throughout the Group

The Company will define matters that subsidiaries must establish and operate as members of the Group , starting with the following items, and will ensure the appropriateness of operations throughout the Group through proper support, oversight, and management by the Company as a holding company.

1. The Dentsu Group Code of Conduct was drafted as the standard for acceptable corporate behavior and embraces the entire Group, including subsidiaries. Each subsidiary passes a resolution on the adoption of the Code.
2. Subsidiaries will define standards pursuant to the Dentsu Group Code of Conduct, and by resolution of a meeting of the Board of Directors, etc., will ensure compliance and risk management as members the Group.
3. In addition to receiving periodic reports from subsidiaries concerning the business operations, business results, and other significant matters that may have significant effect on the business operation or business results of the Company, subsidiaries will request advance approval of the Company, consult with the Company, or report to the Company. I think "Dentsu Group" is an error in the base English translation since the term is defined as "the Group".
4. In order to ensure efficient and appropriate decision-making and business execution of the businesses, the Group Management Team is responsible for the management and oversight of four areas through the Group Executive Management Meeting: (i) Japan, (ii) Americas, (iii) Europe, Middle East and Africa, and (iv) Asia Pacific.
5. The Company will enforce the establishment and the operation of the system described in the following on the subsidiaries.

2. Compliance System for Group Officers and Employees

1. The Company’s Directors, Executive Officers and other Group Management Team Members, and subsidiaries’ Directors and Corporate Officers, must perform their duties appropriately, in accordance with rules such as the Board of Directors’ Rules, Rules for the Operation of the Important Committees of the Group, Directors’ Rules, Executive Officers’ Rules, Group Management Team Members’ Rules, and Corporate Officers’ Rules.
2. If a Director, Executive Officer or other Group Management Team Member of the Company, or a Director or Corporate Officer of a subsidiary, discovers a violation of the prevailing laws or comes across any other serious compliance-related issue, it is imperative that he/she reports it without delay to the Board of Directors or the Important Committees of the Group. The Audit Committee of the Company or Statutory Auditors, the Board of Statutory Auditors, the Audit Committee, or the like of each group company must also be immediately advised of the circumstances.
3. In order to foster a corporate culture of compliance and maintain and improve the Group’s compliance systems, the Company’s Directors, Executive Officers and other Group Management Team Members shall take the initiative in establishing compliance-related rules, and under the supervision of the Company’s Group Management Board, the Group Compliance Committee shall monitor, among other things, the status of compliance, the enhancement of compliance measures, and the response to such measures at each group company.
4. As channels available to the Group Officers and Employees, the Company has set up and properly operates an internal reporting both inside and outside the Group that can be accessed directly as well as a proposal system to respond appropriately in the event a law is broken or some other internal compliance issue arises.
5. If the Audit Committee of the Company or a Statutory Auditor, the Board of Statutory Auditors, the Audit Committee, or the like of each group company states opinions on the Company’s compliance system or requires steps to improve the system, Directors, Executive Officers and other Group Management Team Members, and Directors and Corporate Officers of subsidiaries, must respond without delay and make the recommended improvements.
6. The Company has established a department to facilitate the termination of business relationships with organized crime groups and elements thereof—termed "antisocial forces"—when a link is discovered and to resolutely refuse any and all future transactions. This department functions as the liaison between the affected in-house divisions and the relevant authorities to expedite an appropriate course of action.

3. Systems to Ensure Efficient Execution of Duties by the Company’s Executive Officers and other Group Management Team Members, and the Directors and Corporate Officers of subsidiaries

1. In order for the Company’s Executive Officers and other Group Management Team Members, and the Directors and Corporate Officers of subsidiaries to carry out their duties efficiently, in addition to meetings of the Board of Directors, the Group Management Board, and the Group Executive Management Meeting, meetings of various committees will be held in order to make decisions on important matters pertaining to management policy and strategy appropriately and expeditiously.
2. Items resolved at such meetings are transmitted to all employees through the corporate structure for prompt reflection in the execution of duties. Urgent items are posted on the internal electronic bulletin board in the interest of rapid dissemination.

4. Storage and Management of Information Related to the Execution of Duties by the Company’s Executive Officers and other Group Management Team Members, and Directors and Corporate Officers of subsidiaries

Information concerning the execution of duties by the Company’s Executive Officers and other Group Management Team Members, and Directors and Corporate Officers of subsidiaries, is stored and managed appropriately, in accordance with the Company's Documentation Management Rules and Information Management Rules etc.

5. Risk Management System

1. The Company’s Executive Officers and other Group Management Team Members establish risk management regulations to minimize risks of future uncertainties that may hinder the achievement of the Group’s business objectives, and to take advantage of these as opportunities. The Group Risk Committee performs self-checks with regard to the situation of risk management under the Company’s Group Management Board, selects material risks to be handled with priority, and implements risk management based on concrete response plans.
2. The response policy for material risks in management and other material items concerning risk management are reported to the Board of Directors and the Audit Committee of the Company or Statutory Auditors, the Board of Statutory Auditors, the Audit Committee, and the like of each group company.

6. Internal Structure to Support the Audit Committee and their Independent Status

The Company maintains an Audit Committee Office, which consists of employees who assist the Audit Committee in their duties. This office reports directly to the Audit Committee, thereby preserving its independence from Executive Officers and other Group Management Team Members and effectiveness of instructions from the Audit Committee.

7. System for Reporting to the Audit Committee and Improving Audit Effectiveness

1. Policies are in place to define issues that Group Officers and Employees (excluding Directors who are members of the Company’s Audit Committee; hereinafter the same in this paragraph) are required to report to the Audit Committee, while at the same time, the system ensures that significant matters that have an impact on the Company’s business operations or business results are reported by Group Officers and Employees to the Audit Committee in a certain and prompt manner.
2. In the event that the Audit Committee requests information other than that indicated above, Group Officers and Employees and its subsidiaries are still required to respond without delay.
3. It will be ensured that parties who report under the condition of the previous items do not receive harmful treatment as a result of reporting.
4. Pursuant to laws and regulations, a policy will be defined to account for expenses, etc., incurred during the course of execution of duties by the Audit Committee Members, and this information will be disseminated to concerned parties.
5. To enhance audit effectiveness, a system will be established to audit the Group as a whole by the audit committees of organizations overseeing Japanese and overseas businesses, respectively, together with the Company’s Audit Committee; the Company’s Audit Committee will receive reports from such audit committees, and ensure collaboration with the Internal Audit Functions and External Auditors.

8. System to Ensure Appropriateness of Financial Reporting

1. The President and Chief Executive Officer (CEO), Chief Financial Officer (CFO), and Chief Governance Officer (CGO) of the Company, under the supervision of the Board of Directors, shall maintain and continuously improve a system that ensures appropriateness in financial reporting by the Group.
2. The Company’s departments involved in business activities and subsidiaries shall perform self-checks through the course of day-to-day operations to determine if internal controls are functioning properly, and the subsidiaries shall report the results thereof to the Company.
3. The Internal Audit Office shall monitor the Internal Control System from a perspective free of operational bias to assess the effectiveness of internal controls related to financial reporting.