[Translation]
October 2, 2017
To Whom It May Concern:
Company name: ASATSU-DK INC.
Name of Representative: Shinichi Ueno, Representative
Director, President & Group CEO(Code: 9747, Listed on First
Section of Tokyo StockExchange)
Contact: Kaori Nakajima, Department
Director, Office of Corporate
Communications
Tel: 03 (6830) 3855
Notice of Termination of Capital and Business Alliance with WPP GroupThe Company hereby gives notice of the resolution at the board of directors meeting
held on October 2, 2017 to terminate the capital and business alliance (the “Capital andBusiness Alliance”) with WPP plc and its group companies (collectively, the “WPPGroup”).
1. Grounds for Termination of Alliance
In response to the recent dramatic changes in the business environment surrounding
the advertising industry, the transformation of the Company’s business model has
become an urgent issue. Under those circumstances, the Company established VISION
2020 in 2013 and has progressed with earnest reforms based on the two key approachesof improving the profitability of existing businesses over the short term andstrengthening diverse expertise in order to create new forms of business in the mediumterm, in order to transition from a traditional advertising agency business into a
professional service company specializing in comprehensive marketing support (the“Consumer Activation Company”).
However, although a certain level of results have been seen with respect to improving
profitability, such as enhanced management efficiency by selling noncore businesses
and selecting and focusing on businesses, those results are still insufficient. Further,while the Company has actively worked to strengthen the diverse expertise by, for1

example, establishing Axival Inc. (which provides services such as target information
gathering, surveys to measure the effectiveness of advertising, and media investment
effectiveness analyses) and making it a consolidated subsidiary, as the market
environment of the advertising industry has changed faster than anticipated, further
business innovations and structural reforms are unavoidable. There is an urgent need for
the Company to execute reforms that are even more far-reaching than previously withan aim to achieving VISION 2020.
On the other hand, the Company entered into an agreement on August 3, 1998
regarding the Capital and Business Alliance with the WPP Group, which is one of theworld’s major advertising enterprises, and the Company and the WPP Group’sadvertisement companies pushed forward with initiatives such as the establishment ofjoint ventures, cooperation in media business, and joint cultivation of advertisers.
Looking back on the 20 years or so that have passed since the execution of thatagreement, the Capital and Business Alliance initially provided a certain level of resultsin terms of the establishment of the corporate governance structure and the effectiveinvestment of funds. However, a concrete plan for a collaboration that contributes to theCompany’s and the WPP Group’s interests has not subsequently been attained, andbusiness synergy that expands mutual interests through collaboration (as intended underthe Capital and Business Alliance) has not been specifically realized.
Furthermore, the value of the WPP plc shares owned by the Company under theCapital and Business Alliance (the “WPP Shares”) is excessive in comparison to thescale of the balance sheet required for the Company’s business operations, and theresulting low return on equity (ROE) and capital structure have become problematic forthe Company.
Further, differences have been revealed in the Company’s and the WPP Group’sviews on the mid-to-long-term business strategy as a response to rapid changes in thecurrent advertising industry with regard to the business model that the Company should
strive to achieve and the business partners and investment areas necessary to achievethat model, and the Company has become aware of the situation in which it is difficult
to make swift and flexible decisions that are able to endure a changing businessenvironment.
Under these circumstances, the Company conducted cautious internal discussions,and came to determine that terminating the Capital and Business Alliance with the WPPGroup, and then transitioning to an “open-network” group that collaborates with avariety of business partners to suit the characteristics of each business is the strategy
that contributes to increasing the Company’s corporate value.
2Specifically, in order to realize the Consumer Activation Company, it is necessary torefine the advertising and marketing business by obtaining consumer purchasing data
and analytical techniques and to create a variety of new businesses such as a marketing
consulting business based on that data analysis, a new advertising and marketingbusiness that makes full use of technology, and an automatic media purchasing
optimization business that combines mass media and digital media. Therefore, it isessential to collaborate in a timely and flexible manner with a variety of business
partners according to the characteristics of each business without being tied to a specificbusiness partner.
Under those circumstances, in spite of WPP Group being one of the world’s major
advertising businesses, the Company has determined that the best option from theperspective of maximizing the Company’s corporate value and the shareholders’ joint
interests is to terminate the Capital and Business Alliance with them, which has limited
synergy with the Company, and to receive support from Bain Capital Group—a more
operationally neutral partner with a rich network—and promptly promote a bold reform
policy in collaboration with various business partners.
Accordingly, at the board of directors meeting held today, the board resolved toterminate the Capital and Business Alliance, and submitted to the WPP Group today thenotice proposing to terminate the alliance and the notice requesting sale of the shares ofcommon stock of the Company owned by the WPP Group in accordance with theagreement regarding the Capital and Business Alliance.
Further, the termination of the Capital and Business Alliance does not rule out thefuture possibility for collaboration with the WPP Group and we are open to continue or
newly commence individual collaboration opportunities deemed to be mutually
beneficial to both the Company and the WPP Group.
2. Details of Termination of Alliance(1) Details of the Capital and Business Alliance
The Company has issued 10,331,100 shares of common stock (with a total issuanceprice of 29.98 billion yen) to the WPP Group by way of third party allotment of sharesas part of the Capital and Business Alliance. In addition, the Company acquired theWPP Shares to the same amount as the contribution amount above by way of third
party allotment of shares. The current number of shares owned and the percentage tothe number of issued shares is as follows.
WPP Shares owned by the3Company shares ownedby theCompany
Number of shares
owned
Percentage
number ofshares

WPP Group

31,295,646 shares

10,331,100 shares

2.43%

24.96%

toissued

In the Capital and Business Alliance agreement, it is stipulated that the Companyand the WPP Group agree to form a consortium, through which they form various
collaborations, such as the joint cultivation of new customers, and joint ventures tointroduce mutual customers, and to provide a plan to expand operations on a global
scale. In addition, the WPP Group dispatches one director to the Company.
(2) Procedures and schedule for termination of Capital and Business Alliance
In light of the decision to terminate the Capital and Business Alliance as detailed in“1. Grounds for Dissolution of Alliance” above, the Company today, in accordancewith the Co-operation and Alliance Agreement dated August 3, 1998 and entered into
between the Company and the WPP Group (as amended; the “CAA”), gave notice thatit proposes to terminate the CAA (the “Termination Notice”). The CAA willsubsequently terminate 12 months after the Termination Notice in accordance with theprovisions in the CAA.1
Further, the Company has today sent to the WPP Group notice requesting sale of theshares of common stock in the Company owned by WPP (the “Company Share
Disposal Notice”) in accordance with the Stock Purchase Agreement dated August 3,
1998 and entered into with the WPP Group as part of the Capital and BusinessAlliance (as amended; the “SPA”). Following is a general outline of the Company
Share Disposal Notice prescribed in the SPA.
(1) For 180 days following the giving of the Company Share Disposal Notice fromthe Company to Wall (the “Discussion Period”), the Company and/or anominee designated by the Company have the right to redeem or purchase theshares of common stock in the Company owned by WPP at such time and atsuch price approved by WPP.
(2) If WPP has not approved the sale of the shares of common stock in the1

Mr. Stuart Neish, a director dispatched from WPP Group, questioned the effectiveness of theTermination Notice of the Company at the Company’s board of directors’ meeting held on thedate hereof and thus the Company and the WPP Group may have different opinions on thismatter.
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Company that it holds by the time the Discussion Period has passed, then for
the next following 185 days, the Company and/or a nominee designated by theCompany have the right to redeem or purchase any or all of such shares ofcommon stock in the Company at the average closing price of shares ofcommon stock in the Company on the Tokyo Stock Exchange, Inc. (the“Tokyo Stock Exchange”) over the period of thirty continuous business days
terminating two business days immediately prior to the date of such
redemption or purchase the sale.
(3) If WPP has not sold the shares of common stock in the Company that it holds
to the Company and/or to a nominee designated by the Company by the time
365 days have passed following the giving of the Company Share Disposal
Notice, WPP will promptly sell any shares of common stock in the Company
that it holds through a sale or sales on the Tokyo Stock Exchange to themembers of the general public.
The Company intends to engage in discussion with the WPP Group to reach anagreement on the sale of the shares of common stock in the Company owned by theWPP Group in accordance with (1) above, but if an agreement is not reached during
the Discussion Period, the Company plans to request the WPP Group to sell the shares
to Bain Capital or its affiliate companies in accordance with (2) above or to sell theshares on the market in accordance with (3) above.
The Company also plans to sell the WPP Shares that it holds following thedissolution of the Capital and Business Alliance.
3. Outline of WPP Group(1)Name

WPP plc(2)

Address

27 Farm Street, London W1J 5RJ, UK(3)

Representative title
and name

Chief Executive Officer(4)Business
descriptionAdvertising(5)

Stated capital

133.2 million pounds(6)

EstablishedMarch 1, 1971

Major shareholders

Massachusetts Financial Services Company (6.86%)(7)

and theirshareholding ratios

BlackRock, Inc. (5.77%)
Harris Associates L.P. (5.17%)(8)

Relationship

CapitalSir Martin Sorrell

As of today, the WPP Group holds 10,331,100
5between the listedcompany and therelevant company(9)relationshipshares of the Company, which is equivalent to24.96% of the Company’s issued shares. In
addition, the Company holds 31,295,646 sharesof the WPP plc, which is equivalent to 2.43% of
the issued WPP Shares.

Personnelrelationship

The WPP Group dispatches one director to theCompany.

Businessrelationship

The Company establishes joint ventures,cooperates in media business, and jointly
cultivates advertisers between the WPP Group,
the Company, and the WPP Group’s
advertisement business companies.

WPP plc’s consolidated business results and consolidated financial position for the past
three years
Fiscal year ended
December 2014

Fiscal year ended
December 2015

Fiscal year ended
December 2016

Net assets (consolidated)

7,826.8 million
pounds8,015.8 million
pounds

9,767.6 million
poundsTotal assets(consolidated)

26,622.9 million
pounds

28,749.2 million
pounds34,568.3 million
pounds

5.6 pounds

5.8 pounds

7.2 pounds

Sales (consolidated)

11,528.9 million
pounds12,235.2 million
pounds

14,388.9 million
poundsOperating income(consolidated)

1,507.3 million
pounds1,632.0 million
pounds2,063.1 million
poundsNet profit attributable toparent company
shareholders

1,077.2 million
pounds1,160.2 million
pounds1,400.1 million
poundsNet profit (consolidated)
per share

80.5 pounds

88.4 pounds

108.0 pounds

Dividends per share

35.27 pounds

42.49 pounds

48.33 pounds

Accounting fiscal year

Net assets (consolidated)
per share

4. Impact on Performance
As detailed in 2(2) above, the Company intends to sell the WPP Shares following thetermination of the Capital and Business Alliance. The Company also intends to include
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the profit on sale following the sale of the WPP Shares as extraordinary profit inaccordance with the stock price at the time of the sale. (Note 1)
Today, the Company resolved to enter into an agreement with Morgan Stanley & Co.
International plc regarding derivative transactions for the WPP plc share price for thepurpose of settling the profit on sale. The reason for that agreement is that since themonetary scale of the profit on sale of WPP Shares is extremely large, futurefluctuations in the share price for WPP Shares and exchange rates will significantly
affect the Company’s level of profit, and therefore, it is necessary to hedge the risk offluctuation of share price and foreign exchange rate. In addition, it is necessary toincrease the foreseeability of the Company’s asset value, in order to provide theopportunity to sell the Company’s shares at a price with a fair premium for all of theCompany’s shareholders (see today’s press release by the Company Notice Regarding
Opinion on Tender Offer for Shares of the Company by Bain Capital).
The timing of the sale of WPP Shares is generally anticipated to be next fiscal year orlater, based on the provisions of the agreement regarding the Capital and BusinessAlliance. Therefore, as it stands, there are no changes to this fiscal year’s performance
forecast subsequent upon this matter.
(Note 1) The total book value of WPP Shares owned by the Company (as of December31, 2016) was approximately 22.3 billion yen, and the total market value ofWPP Shares based on the closing price on September 29, 2017—which is thelast business day before the announcement date—is approximately 443 million
pounds (i.e., approximately 65.4 billion yen, using the exchange rate of 150.97
yen per 1 pound). However, the aforementioned profit on sale of WPP Shares isnot fixed at this point in time, as the Company intends to enter into derivativetransactions with Morgan Stanley & Co. International plc regarding theaforementioned WPP Shares, which will likely have a pronounced effect on theprofit on sale based on the conditions of those transactions and the WPP shareprice at the time of the sale. In addition, as detailed above, the timing of theactual sale of WPP Shares is generally anticipated to be next fiscal year or later.
5. Future Outlook
As detailed above, the notification regarding dissolution of the Capital and Business
Alliance has been given to the WPP Group, and the Company shares owned by theWPP Group are subsequently scheduled to be requested to be sold to Bain Capital or its
affiliates, which are the purchasers designated by the Company. Once the sale of theCompany shares is completed by the WPP Group, the WPP Group is expected to no7

longer be a major shareholder or other affiliate of the Company, and a reshuffle of major
shareholders is anticipated.
End(Reference) Consolidated Performance Forecast for Current Fiscal Year (ReleasedAugust 10, 2017) and Consolidated Results for Previous Fiscal Yearmillion yenSales(consolidated)

Operatingincome(consolidated)

Ordinary
income(consolidated)

Net profit
attributable toparentcompany
shareholders

354,700

6,230

9,250

5,580

352,671

5,569

8,688

2,376

Consolidated
performance
forecast for
current fiscalyear(ending
December 2017)
Consolidated
results forprevious fiscalyear(endedDecember 2016)8