ADK Annual Report 2008
Year ended December 31, 2008

ADK Proﬁle
ASATSU-DK INC., commonly known by its initials ADK,
was founded in March 1956 by current Chairman Masao
Inagaki as a small, ambitious ﬁrm focusing on magazine
advertising. ASATSU INC., as it was known at the time,quickly built up a solid client base, primarily in theﬁnancial sector, giving it a strong foundation for growth.
As Japan entered the high-growth years of the
1960s, ASATSU INC. broadened its creative reach toinclude planning and production of animation programsfor the then still-new medium of television. In 1987,
it was listed on the Second Section of the Tokyo Stock
Exchange (TSE), becoming the ﬁrst advertising agency
in Japan to make a public stock offering. The company
listed on the First Section of the TSE in 1990.
In 1998, it made another major move, signinga reciprocal share agreement and strategic alliancewith WPP plc, the world’s largest marketing andcommunications services organization.*
The following year, the company merged with
Dai-Ichi Kikaku Co., Ltd., another Top 10 Japaneseagency, changed its name to ASATSU-DK INC. (ADK),
and entered a period of renewed growth.
Now it is Japan’s third largest total communications
agency and the 10th largest communications service
group in the world.*( * Advertising Age, April 27, 2009)

Contents

Business at a Glance2

To Our Valued Shareholders

4

Message from President and Group CEO

6

Message from Executive Director, Creative Division

14

Corporate Social Responsibility

20

Corporate Governance and Internal Control

22

Board of Directors and Auditors

29

Management’s Discussion and Analysis

30

Forward-Looking Statements and Risk Factors

38

Financial Section

41

Securities Holdings

68

Investor Information

69

ADK Group Network

70

1ADK Annual Report 2008

Business at a Glance
Consolidated Five-Year Summary
Thousands of
U.S. Dollars

Millions of Yen

2008

2007

2006

2005

2004

2008

Gross billings¥399,452¥435,011¥420,059¥424,705¥413,898 $4,388,135

Income Statement Data
Gross proﬁt

49,14351,754

48,68547,77449,079539,855

Selling, generaland administrative expenses

45,44444,61942,29240,28640,819499,220

Operating income

3,699

7,134

6,392

7,488

8,260

40,635

Income before income taxes
and minority interests

3,775

10,122

9,682

11,0289,440

41,4705,181

23,3449,560 $

49,465

Net income

2,125

EBITDA*

¥

4,502

5,350
¥

8,274

5,070
¥

7,590

5,946
¥

8,568

¥

*EBITDA=Operating income + Depreciation/Amortization

Balance Sheet Data

Thousands of
U.S. Dollars

Millions of Yen

Total assets¥191,782¥246,097¥256,754¥246,867

101,617

131,846

141,387

134,751

123,894

1,116,302

2,611

14,354

19,14016,79912,183

28,683

Total net assets*
Total long-term liabilities¥238,900 $2,106,799*For the years until 2005, instead of net assets, shareholders’ equity balances are shown. For details of the difference, please refer to the Notes attached to the Financial Statements.

Per Common Share Data (Yen and U.S. Dollars)
Net income per share (EPS)*¥

48.14 ¥

116.40 ¥106.62 ¥122.11 ¥103.25$ 0.53

20

42

27

36

20

0.22

2,334.48

2,898.49

2,979.79

2,809.30

2,554.78

25.65

Dividend per share
Book value per share
No. of common shares issued

45,155,400 45,155,400 51,655,400 51,655,400 51,655,400

No. of common shares outstanding

43,088,073 45,091,103 47,096,993 47,952,849 48,458,828* The number of common shares is calculated excluding treasury stocks.

Financial Ratios
AS PERCENT OF GROSS BILLINGS
Gross proﬁt

12.30%

11.90%

11.59%

11.25%

11.86%

SG&A expenses

11.38

10.26

10.07

9.49

9.86

Operating income

0.93

1.64

1.52

1.76

2.00

Income before income taxes
and minority interests

0.94

2.33

2.31

2.60

2.28

Net income

0.53

1.23

1.21

1.40

1.25

AS PERCENT OF GROSS PROFIT
Operating income

13.8%

13.1%

15.7%

16.8%

Staff cost

62.4

7.5%

57.8

57.8

56.0

55.7

Return on equity

1.8

3.9

3.7

4.6

4.3

Return on assets

1.7

2.8

2.5

3.1

3.5

Equity ratio

52.4

53.1

54.7

54.6

51.9

Current ratio

1.50 ×

1.48 ×1.44 ×1.46 ×1.45 ×

Note: For convenience purposes, U.S. dollar amounts are converted from Japanese yen at the rate of ¥91.03=US$1, the approximate rate of exchange as ofDecember 31, 2008.

2

Business at a Glance

ADK Group

��

�����
�����

����
����

��������������
��������������
���������������������������������������������������
���������������������������������������������������
�������������������������������
�������������������������������
��������������������
�������������������
�������������������������
�������������������������
�����������������������
�����������������������
�������������
������������
��������������������������
��������������������������
��������������������������������������
��������������������������������������
�����������
����������
�������������������������������������������������
�������������������������������������������������
������������
������������
������
������
���������������������������������������
���������������������������������������
����������������������������
����������������������������
��������������������������������
��������������������������������
������������
�����������
������
������
������
������
���������������������
��������������������� ■Japan����������������������������������
����������������������������������
��������������������������
��������������������������
■China■Asia������������
�����������
��������������������������������
��������������������������������
������������������
������������������ • ASATSU-DK SINGAPORE Pte. Ltd.
• Kyowa Kikaku
Ltd.
• Guangdong Guangxu (ASATSU)�������������������������������
�������������������������������
���������������������������
���������������������������• ADK International Inc.
Advertising Co., Ltd.*• ADK Thai Holding Ltd.
• ADK Dialog Inc.
• ASATSU-DK HONGKONG Ltd.
• DAI-ICHI KIKAKU (THAILAND) Co., Ltd.
• ADK Arts Inc.
• DK ADVERTISING (HK) Ltd.
• ASDIK Ltd.
�������������
�������������
����������
���������
• Boys Inc.
• ASATSU Century (Shanghai)������������������
������������������ • ASATSU (Thailand) Co., Ltd.
������������
������������
• Digital Advertising Consortium Inc.*
Advertising Co., Ltd.
���������������������������������������
���������������������������������������
Eiken Co., Ltd.
• Shanghai Asatsu Advertising Co., Ltd.
■EuropeNihon Bungeisha Co., Ltd.
• Asatsu Europe Holding BV
Neo Shobo Inc.
Taiwan• Asatsu Europe BV
Nippon Information Industry Corp.*• UNITED-ASATSU INTERNATIONAL Ltd.
• Asatsu (Deutschland) GmbH• DIK-OCEAN Advertising Co., Ltd.

• Advertising

Other business*Afﬁliates accounted for by equity method������������������������������
�����������������������������

���������
��������

����������������������������������
������������������������������
Millions of Yen����������������
����������������

���������������
(Gross���������������
Billings)

��������
��������

Advertising vs. Other Business(Gross���������������
Billings)
���������������

���������������
��������������� ������
������ ������
������
������������������
��������
������
������

������������������
��������
������
������

■ ADK¥358,595 (85.8%)■ Advertising■ Domestic subsidiaries¥35,555 (8.5%)■ Other Business■ Overseas subsidiaries(Adjustments)

Millions of Yen�������������
������������� ��������
��������
��������
������

��������
��������
��������
������

��������������������
�������������������� �������
������� ������
������

�����������
����������• ADK America Inc.

ADK vs. Consolidated Subsidiaries��������������������
������������������� �������
������� ������
������

■North America¥391,229 (97.9%)¥8,222(2.1%)¥23,921 (5.7%)¥(18,619)3

4

Masao Inagaki

Koichiro Naganuma

Representative Director, Chairman

Representative Director, President & Group CEO

To Our Valued Shareholders

It is our pleasure to report on the ADK Group’s performance in ﬁscal 2008, ended
December 31, 2008.
Since our founding in 1956 as an advertising agency called ASATSU INC., wehave steadily expanded our operations based on an unwavering commitment to the“Management by All” philosophy. This means every employee in the ADK Group is
expected to embrace a management-level perspective and approach client needs
proactively.
In 1987, we were ﬁrst listed on the Second Section of the Tokyo Stock Exchange(TSE). We moved to the TSE’s First Section in 1990, becoming the ﬁrst advertising
company to do so. In the same year, we merged with Dai-Ichi Kikaku and changed ourname to ASATSU-DK INC. Today, we are the third largest total communications agency
in Japan. Our quest is to become a genuine “Future Agency” able to respond ﬂexibly
to the changing needs of advertisers and contribute to the business performanceof our clients.
In 2008, ﬁnancial crises in the United States and Europe sparked a deepening
worldwide recession. Similarly, the Japanese advertising industry, ADK’s main businessarea, faced extremely difﬁcult challenges caused by a sharp contraction in demand.
In this environment, the ADK Group adopted various measures in an earnest
attempt to prevent a decline in performance. Unfortunately, however, we were unable
to achieve the results of the previous year.
Although we expect business conditions to remain tough for the foreseeable
future, we also see these challenges as an opportunity to solidify our foundation.
There are many things we should do in such times in order to make great strides whenthe economy turns around. These include honing our competitive edge in our corebusinesses while reﬁning our vision over the long term. We should also rethink how we
can contribute to society as a corporation while maintaining a strong ﬁnancial position.
Guided by our lifelong “Management by All” philosophy, we will band together toovercome these difﬁcult times and resume our growth trajectory to achieve these goals.
We ask for the ongoing support and understanding of our shareholders as wetackle the challenges ahead.
June 2009

Masao Inagaki

Koichiro Naganuma

Representative Director, Chairman

Representative Director, President & Group CEO

5

Message from Koichiro Naganuma,
President and Group CEO

Clearly,business conditions
are severe.

However,

perfecttime
to dothis is thewhat we needto do.

6

Message from President and Group CEO

Fiscal2008
2008 in Review
Fiscalin Review

Fiscal 2009
Fiscal 2009 Outlook

OutlookIn the year under review, turmoil in the U.S. ﬁnancial

Since the start of ﬁscal 2009, economic conditions inmarkets spread quickly throughout the world, causing

Japan have worsened. Private institutional economists

economies to contract. Japan was no exception. Frompredict that real GDP in the ﬁscal year ending March

the autumn of 2008, corporate earnings started2010 will contract by around 5%. The government

to decline amid rising anxiety about the economic

Cabinet Ofﬁce reported its forecast of a 3.3% decline at

outlook. The situation was exacerbated by the yen’s

the extraordinary cabinet meeting on April 27. With the

sharp appreciation, which further affected exports andstrong yen, meanwhile, overall corporate performanceearnings. Meanwhile, the credit market deteriorated

continues to falter, and Japanese newspapers are ﬁlled

and asset values plummeted, sparking economic

with stories about job cuts by major corporations. In

contraction. According to statistics released by thesuch an environment, we can hardly expect clients toJapanese government, real GDP declined 0.6% year onincrease their advertising expenditures.

year, whereas nominal GDP was down 1.6% (March 12,
2009, Cabinet Ofﬁce of the Japanese government).
Declining corporate earnings had a negative

Since its establishment, ADK’s goal has been toachieve consistent growth. In the current ﬁscal year,
however, we forecast moderate negative growth

impact on advertising expenditures. In 2008, such

amid predictions that economic conditions in 2009

expenditures were down around 5%.

will remain stagnant. Speciﬁcally, we forecast a 2.2%

Unfortunately, ADK was unable to avoid a revenue

year-on-year decline in gross proﬁt and a 16.2% fall indecrease. Consolidated gross billings for the year wereoperating income on a consolidated basis. Given thedown 8.2%. Thanks to concerted efforts to reduce theweakness of the domestic economy, these are quite

cost of sales, the decline in gross proﬁt was limited toaggressive forecasts, which may be difﬁcult to achieve.

5.0%, but operating income fell 48.1% and net income

However, corporations will not completely discard

dropped 60.3%.

their advertising and other communications programs,

The parent company accounts for 89.8% of total

even in the most difﬁcult circumstances. Indeed, theGroup gross billings. On a non-consolidated basis, grossimportance of communicating with consumers willbillings declined 7.5%, a greater year-on-year decline

only increase as business conditions deteriorate.

than our competitors (see Gross Billings of 8 Leading
Advertising Agencies at right). Major factors here werea fall in billings in the media buying business and a
relatively low number of new customers comparedwith the previous year. We also failed to expand ourGross Billings of 8 Leading Advertising Agencies(Non-Consolidated)

Internet and sales promotion businesses, which we haveidentiﬁed as growth areas. On a positive note, the gross

2008
January–December

2008/2007¥1,499,152-5.6%(Millions of Yen)

margin improved 0.3 percentage point as the decline

Dentsuin gross proﬁt was limited to 5.0%. This reﬂected our

Hakuhodo

705,750

-1.6%

ADK

358,595

-7.5%

Daiko

138,621+0.5%

and administrative expenses, especially personnel costs.

Tokyu Agency

116,387-4.6%

This signiﬁcantly affected operating income, which

East Japan M&C

104,159-5.1%

fell 60.1%.

Yomiko89,488-8.7%

Asahi Koukokusha

51,577-11.0%

Total of 8 Agencies¥3,063,730-4.8%

efforts to enhance the proﬁtability of our media buying
business. In the face of the revenue decline, however,we were unable to take full control of selling, general

7

ADK Annual Report 2008

Corporations demand communication plans based on

On the ﬂip side of the coin, competition will

accurate analyses of consumer insights, so they canintensify as market demands remain limited. How cantranslate such plans directly into revenues. In short,

we turn these challenges to our advantage? To be frank,

they need total communications agencies that will

I think there are no magical solutions. ADK simply

contribute to their ﬁnancial results. This, in turn, will beshould reemphasize what it has achieved so well ina good opportunity for agencies like ADK.

the past: to promote a 360-degree communications

Imagine you are the corporate communications

approach based on a media-neutral and solution-

manager. Naturally, you want to achieve the greatest

neutral policy that represents the best interests ofimpact with your limited advertising budget. Proposals

clients. Does that sound too simple? If so, let me explainfrom just one or two agencies will not put your mind

in more detail. Then you will understand where we areat ease. You need to compare the ideas of a few moreheading and how we are preparing for the journey.

agencies, so you can select the agency that will help
you deliver the optimal outcome. The most importantcriteria in the selection process are not the sizes or long
histories of the bidding agencies. You need to reassess
the services your agencies have provided so far, andchoose the agency most likely to boost your bottom
line, rather than blindly retaining an existing agency
simply because you have a relationship from the past.

3 Cs + 1 C :“3 Cs + 1 C” Concept:
The
to Effective
The
KeyKeyto Effective
360-degree
Communications
360-Degree
Communications

Situations like this could provide increased

The rapid progress of the Internet and mobile

opportunities for ADK, which has a relatively youngcommunications technologies, together with thehistory, to challenge conventional wisdom and create

diversiﬁcation of media, are reshaping the ways

bold new communications ideas. At present, we areconsumers make purchases and interact with various

the third largest agency in Japan, but our market sharemedia. To prevail in today’s challenging advertising

is only about 6%. So we have ample latitude to growenvironment, agencies must be fully in tune with threeby penetrating the remaining 94%. Even if we cannot

major market changes, which I call the “3 Cs.” These

anticipate growth in the overall market, we believe weare the “changing patterns of consumer purchasing

can certainly increase our share of that market.

behavior,” the “changing nature of consumer media
consumption” and the “changing communications

A Day in the Life of a Working Woman���������
�����������

�������������

��������
�����������

������������
��������
��������������

����������������

���������������

�������
�����������

���������������
������

�������
������������

����������������

360-Degree
Communications
Approach��������

�����������������

• Switch on radio

7:30 Have breakfast• Watch TV���������

• Read newspaper• Read ﬂiers������������

��������
���

8������������

7:00 Get up����������
�������Message from President and Group CEO

programs demanded by clients.”

the restaurants they visit. Then we select the mostTo successfully address these changes, we must

effective touchpoints and integrate them with creative

embrace one more “C.” Speciﬁcally, we must transform

ideas. The key is to create unique and extraordinary

ourselves by “changing our agency business strategies,”

ideas that integrate those touchpoints most efﬁciently.

which means changing our approach from mass media–

This is the true essence of 360-degree communications.

centric to 360-degree communications programs.
For a long time, agencies have provided media
plans that focused on the four traditional mass media.
But those old-style strategies no longer work. I haveAdvertising Is a

Advertising Is a People Business

People Businessbeen saying that ADK must be a “Future Agency.” Thatmeans becoming an agency that can instantly addresschanging business conditions and client needs. ThisTo formulate 360-degree communications programsmeans providing 360-degree communications programs

that accurately address the needs of clients, we need toto our clients.

gather unparalleled knowledge about consumer mind-

When I observe the latest lifestyles of today’ssets and various media. At the same time, we need toyoung people, I am truly amazed by their high levelremain fully abreast of constantly advancing Internetof literacy in information technologies. Despite being

technologies. These tasks require huge amounts ofswamped by a ﬂood of information, they skillfully selectintelligence and knowledge, as well as applicationand exploit only the information they deem beneﬁcial.

expertise. Advertising is a people business. Therefore,

Consumers themselves are also a great source ofour competitive edge lies in our human resources.

information, sometimes providing the sparks that later

We nurture our employees on a continual basis

explode into “hit” products. If we end up producing

through our highly diversiﬁed, in-house educational“cross-media” programs that simply combine traditional

program, called ADK University. In addition to training

mass media with Internet advertising, it will be difﬁcult

courses for new graduates and mid-career recruits,

to properly attract the attention of young consumers.

ADK University provides seminars on new advertisingFirst, we must deeply analyze their information

technologies and hosts courses featuring guest

usage and purchasing patterns and consider all of theirlecturers. Students also learn how to utilize ADK’s

potential touchpoints. These include not only traditional

unique media planning system and receive practicalmass media but also the Internet, out-of-home (OOH)

training on Internet media sales techniques.

media, in-store media, movies, sports events—and even

8:00 On the train• See ad posters in the train

9:00 At work

• Send e-mails via cell phone• Work

8:30 On the road

12:00 At lunch• See signboards• Read information on restaurant placemat• Scan information using barcode reader• Chat with friends to exchange information

9

ADK Annual Report 2008

DevelopTechnologies
toDevelopTechnologies
SupportOur
Peopleto Support
Our
PeopleThe key tasks for nurturing talent are to transform
our media planners into communications channel
planners and our creative directors into communications
directors.
The term media planner may be out of date

All of ADK’s men and women are passionate workers

now. It sounds like a planner who can only combine

and keen learners. But companies cannot maintain suchtraditional media. That kind of planner must evolve into

enthusiasm through simple verbal messages. Rather, wea communications channel planner who can integrate

must encourage our human resources by helping themtraditional and any other new media, such as thearm themselves with the weapons needed to win in theInternet, with innovative ideas. The communications

market battleﬁeld.

channel planner is also responsible for each advertising

In addition to its Media Planning Support Systembudget’s return on investment (ROI). Our client(MPSS), ADK has developed a unique communications

contact person, such as the manager of corporate

program proposal system to support the activities ofcommunications, gathers advertising budgets from theits account service people. We are also developing andbrand managers in his or her company. Each brandﬁne-tuning a system for verifying the effectivenessmanager regards advertising spending as an investment,of our ad campaigns. At the end of the day, our clientsand naturally expects maximum return on thatwant maximum advertising efﬁciency more thaninvestment. So our clients are akin to fund managers,

anything else. Advertising is a form of investment,

and we have to support them from that perspective.

so it is natural that they want maximum return on

Fostering ad creators is also crucial. Long gone

their advertising outlays. At ADK, we formulate andare the days when creative directors simply produced

implement optimal ad proposals designed to maximize

good ideas for television commercials. Now, we need

ROI. We also have an ROI model to quantify thecommunications directors whose roles extend beyond

effectiveness of our proposals. As an advertising

the scope of traditional ad creators. Our clients demand

agency, we feel it is our duty to provide such services.

more advanced and more comprehensive creative ideas

Therefore, we are actively investing human resourcesthat incorporate the Internet and other new media.

into these areas and pursuing the ongoing development

For these reasons, ADK fosters young communicationsof our technologies and systems.

creators through specialized personnel development
programs. We also scout the industry for exceptional
talent. In these ways, we are working constantly toreinforce group-wide creativity.
Later in this report, Yoshiki Uemura, director
in charge of the Creative Division, will provide an
overview of the activities of ADK’s creators.

18:00 On the way home
• See in-store advertising• See electronic signboards• Sometimes go to movie theater

24:00 Go to bed

13:00 At work

21:00 Back home

• Work• Watch TV• Search information on the Web• Net shop using cell phone• Read magazines10���������
�����������
��������

�������������

������������
��������Message from President and Group CEO

Increase
Business Potential by
Increase
Utilizing theBusiness
AttributesofPotential
ADKGroup theCompanies
by
Utilizing
Attributes of

ADK Group Companies

Further Reinforce
Our
Content
Business
Our
Content
Business
One of ADK’s greatest strengths is its content business,
highlighted by television animation programs. From

The ADK Group has a number of advertising companies

1963, soon after our foundation, to the present day,with highly specialized skills. Deepening the ties

we have created a multitude of hits. These include

between these group companies, therefore, should

Doraemon, which is extremely popular in Japan andserve as a driver of business innovation and expansion.

throughout Asia, and Yu-Gi-Oh!, a major hit in North

In particular, cooperation between ADK and ADK

America and Europe.

Interactive, which was established in 2008 to specialize

Animation characters are hardworking andin Internet advertising, should become a major driving

reliable. They do not grow old with passing years, andforce for revenue growth. In the Internet ﬁeld, where

they do not cause scandals. By using these characters

new technologies continue to emerge, earning thein advertising, we can entice people with children

satisfaction of clients requires young people withto visit the stores of our clients. We have had many

specialized knowledge and innovative approaches.

successes using popular characters in ad campaigns for

Equally important are people who can devise well-automotive retailers and convenience stores. We canrounded communications programs incorporating

also use highly prominent, longtime favorite characters

all forms of media—not just the Internet. By working

in promotions for banks and other sectors where

hand in hand, ADK and ADK Interactive can offer fresh

trust needs to be emphasized. We believe that content

proposals that are closely attuned to the needs ofcharacters will continue to be a major driver of businessclients.

expansion in the future.

In ﬁscal 2008, we formed a capital and business

But there are some worries. At present, Japan’s

alliance with Cosmo Communications, which has

birthrate is declining, along with its population. The

many clients in the apparel industry and specializes

number of animation programs on network televisionin magazine tie-up advertising for fashion brands.

channels has been decreasing. By contrast, let us look

Since its foundation, ADK has been strong in magazine

at Asia, where there are many children who adore

advertising. But by deepening our ties with Cosmo

Japanese animation. It is obvious that people all overCommunications, in which ADK has a 30% stake, we

the world understand the high quality of Japaneseplan to further expand our presence in this ﬁeld.

animation. The animation market is global in nature andKyowa Kikaku, another ADK Group member,encompasses all regions, including North America, Latin

specializes in advertising of pharmaceuticals andAmerica, Asia and Europe. Going forward, ADK will

medicine. Recently, ADK has acquired new clients byplace more emphasis on exporting Japanese animation

making joint presentations with Kyowa Kikaku. The

programs overseas. Using our characters overseas

pharmaceuticals market is regarded as a potential

can also be a lucrative secondary income source. For

growth area despite current difﬁcult conditions.

example, we recently used Doraemon in a campaign forWith the inclusion of health foods and nutritionala Japanese home electronics manufacturer in Thailand.

supplements, this market is set for further expansion.

This made the brand more familiar and appealing to

By further strengthening our ties, we are conﬁdent oflocal consumers.

attracting new clients and new brands.

11

ADK Annual Report 2008

Back to Japan. Although the number of children

When advancing our business overseas, we either

is declining, many Japanese grown-ups still loveuse our alliance with WPP to work jointly with a WPP

animation. Moreover, although they are spending lessGroup company, or we seek a local independent partner,and less time watching television, they are switchingdepending on the size and nature of our businessto computers and mobile phones instead. For thisneeds. For large accounts, we tend to take advantage ofreason, ADK is promoting the delivery of video content

the WPP alliance. Our policy is to select the best option

to mobile devices. Mobile Internet sites where people

according to speciﬁc regional circumstances.

can view animation programs and comics on demand

Soon after the normalization of relations between

are attracting more and more registered members.

Japan and China in 1972, ADK started to develop

Meanwhile, sales of animation DVDs to adults are

its business with China. As the economy of China

strong. Such trends underline the potential of thedeveloped in the 1990s, we built our own network indomestic animation market to expand even further.

that nation while working in cooperation with Chinese

Therefore, we must swiftly develop new characterscompanies. In the greater China region (including

while carefully nurturing existing favorites.

Hong Kong and Taiwan), we have 13 afﬁliates in sevencities. Going forward, we will use our core subsidiaryin Shanghai to spearhead further development ofour business network in China. In January 2009, for

Focus
GrowthFocus
on on
Growthin inOverseas
Markets
Overseas
Markets

example, we established a local operation in Shanghai
jointly with a Chinese company, with the aim to advanceour spatial development business targeting major
exhibitions, such as the Shanghai Expo.

Even in the context of a worldwide recession, several
overseas markets have relatively good prospects for
growth. Notable among them are China, India and the
Middle East. In 2008, ADK opened a representativeofﬁce in Dubai, United Arab Emirates. I believe
ADK is the ﬁrst Japanese ad agency to have a fulltime representative in the region. By doing so, we
can provide more ﬂexible support for our local

Maintain a Balanced Approach to

Maintain anda Balanced Approach
Human
to Cost-Cutting
Financial Resources

advertising business and earn the conﬁdence of

So far, I have explained our strategies for confronting

Japanese companies. In February 2009, meanwhile,the difﬁcult market environment. I trust you recognize

we established ADK Fortune in India as a joint venture

the signiﬁcance of human resources at advertisingwith JWT, a leading WPP brand. Russia also has major

agencies and understand that the key to growth lies

potential for advertising agencies despite its current

in fostering and properly utilizing these resources.

economic challenges, whereas South Korea is also

Another crucial consideration is manageriala crucial market in the Asian region. Therefore, webalance. In times of economic stagnation, expenses

established ADK Korea in 2009 and are preparing towill easily erode operating income if growth inopen representative ofﬁces in Russia.

gross proﬁt is weak. It goes without saying that cost
ﬂexibility becomes more important in such times. In
the advertising business, however, personnel expenses
constitute the major proportion of a company’s outlays.
While realizing the importance of human resources
and their motivation, we still have to control the headcount. Survival is the overriding priority, and we must
conserve our energy to tackle the next growth period.

12Message from President and Group CEO

Unchanging Commitments:
Unchanging
Commitments:
StableFinancial
Position
StableFinancial
Positionand Strong andShareholder
ReturnEmphasis Return
StrongShareholder

Emphasisratio to 41.0%. During the year, we also bought back 2
million of our own shares, outlaying a total of ¥5,876
million. Total shareholder return* was, therefore, theequivalent of 317.9% of net income for the year underreview.
Going forward, we will focus on raising earnings
per share (EPS) and strive to further improve capital
efﬁciency through ongoing share buybacks, while also

ADK has long pursued sound ﬁnancial management
policies and built a solid funding ﬁnancial base. Dueto plummeting stock markets around the world, theworking to raise the return on equity (ROE).
*Total shareholder return includes payment of cash dividends,
purchase of own shares and purchase of odd-lot stocks.

value of our marketable securities and other asset
holdings has deteriorated somewhat. However, we still
have an adequate asset base that includes ¥14,881
million in cash and time deposits and ¥34,926 million
in investment securities. Meanwhile, interest-bearing

In Conclusion
In Conclusion

debt has declined to ¥1,043 million. As a result, we havemaintained a high equity ratio, which was 52.4% at the

It is difﬁcult to envisage how soon the Japaneseﬁscal year-end. The Company has a stable ﬁnancial baseand world economies will recover. I am hopeful thatthat will enable it to focus on its core businesses withpositive signs will begin to appear soon, and we have topeace of mind. Moreover, we are well positioned

prepare ourselves for the big jump when the economy

to make investments that we deem necessary.

comes back. No matter how difﬁcult the circumstances

ADK is the third largest advertising agency inJapan, after Dentsu and Hakuhodo. Although many

become, ADK will forge ahead without making excuses.
Since our foundation, we have adhered to thecompanies are trying to catch up, they pose no threat

principle of “Management by All.” Under this principle,

to ADK in terms of scale, technological prowess andevery employee in the ADK Group is expected to have aﬁnancial stability. At this stage, therefore, we can

top management-level perspective and approach client

prepare for the next phase of growth without feelingneeds proactively. Guided by this lifelong philosophy,

pressure from our smaller competitors.

we will band together to overcome these difﬁcult times

Our shareholder-oriented approach to proﬁt
appropriation has remained unchanged. Throughand put ourselves back into a growth trajectory. I believe
adversity provides an opportunity for ADK to grow.

dividend payments and share buybacks, we willcontinue to provide value to shareholders overthe medium and long term. We will maintain ourconsolidated dividend payout target of 35% while
keeping annual dividends stable, at a minimum of¥20.00 per share. For the year under review, we
calculated that we would reach our 35% payout ratio
target by paying a dividend of ¥17.00 per share. In lightof our minimum dividend policy, however, we declareda ¥20.00 dividend per share which will bring the payout

13

Message from Yoshiki Uemura,
Executive Director, Creative Division

Creativity:

The
EngineThat Drives

a Total Communications

Agency14

Message from Executive Director, Creative Division

Creative Ideas,

Vital Ingredients of a

Successful Media Strategy

Creating“Human Talent”
Creating“Human Talent”

It has been some time since they began to say

ADK Creative Laboratory“consumers are generators of communication, rather

We are working urgently to nurture people who canthan recipients.” This does not simply mean that theirdesign and coordinate all-encompassing communications

consumption patterns are changing, or that they areprograms that reach far beyond traditional mass media

striving for higher levels of information literacy. Instead,advertising. Here, we are shifting our emphasis fromit implies that consumers have considerable ﬁltering

Creative Directors to Communications Directors.

skills when bombarded with advertising and various

The ADK Creative Laboratory is spearheading thisforms of information. In other words, consumers makeimportant effort.

instant decisions about advertising/information. Does

Formed two years ago, the ADK Creative

this affect me? Should I press the link? Or is it justLaboratory provides upskilling programs aimed atperipheral “noise” of no value to me? If they judge it

nurturing next-generation creators. It empowers them

to be worthless noise, they will look no further. Evento acquire the skills to effectively address changes

the most efﬁcient media strategy is meaningless if thein the communications environment. At present,

consumer does not actively link to the information.

around 200 creators are participating in the program.

Here, the key factor is ideas—creative ideas

Organized into four groups according to age and careerthat win the hearts of consumers and prompt thembackground, they gather once a month to research andto identify with a particular brand. These are thestudy various issues. The topics are diverse, ranging

vital ingredients of a successful media strategy thatfrom learning about ADK’s original EX-Branding method

maximizes the impact of a communications plan. A

to technical studies related to the Web. The programcommunications plan that engages the consumer is far

also includes interactive sessions with artists who

more effective than the sheer volume of advertising.

have excelled in various ﬁelds and covers everything

This is because consumers are willing to participate infrom marketing to practical application. The objective

the communications plan by dispatching information.

of the program is to steadily increase the skill levels

Our mission now is to join consumers as “partners inof all employees and provide them with the broad

crime” in our plan to increase brand value.

perspectives required of successful Communications

To this end, we must create appealing branded

Directors.

content—creative entertainment based on the brandvalue—that motivates consumers to become proactively
engaged. This is the ongoing task for we ad creators,
who must remain always at the forefront of changing
communications trends and equip ourselves with theskills and perspectives to address those trends. Indeed,creativity is the engine that drives ADK’s business.

15

ADK Annual Report 2008

Active Support ofAdvertising
Active Support of Awards“Individuality and Specialization”

I think it is important for all personnel in our Creative

The most important attributes for ad creators are

Division to ask themselves: As a communications“individuality” and “specialization.” Our Creative

professional and creator, do I have the ability to create

Division currently has ﬁve projects emphasizing

something with real commercial value?

individuality, specialist skills and areas of speciﬁc

Advertising Awards

To respond to this question, it is good to knowinterest. These projects were not established as part of

how one’s own work is impartially evaluated by people

ADK’s corporate infrastructure. Rather, they evolvedon the outside. One method we use to raise the value oforganically from the free will of our people. At theour creative personnel is to actively enter their work infront lines of advertising, they can preempt insights

advertising competitions, both in Japan and overseas.

into the changing needs of consumers and clients andIn the past few years, ADK has enjoyed a dramatic

quickly address those needs, as well as create a forum

increase in advertising-related awards at home andto demonstrate their own capabilities. Like musiciansabroad. In 2008 alone, we received 121 prizes in total.

in a jazz session, they act with large freedom to devise

This underscores the value of our creative ideas, which

innovative, creative works independently of existing

reﬂect the needs of the times and encourage consumers

ideologies.

to access the brands that we represent. We are proudof the high acclaim that our work receives.
In 2007, ADK won a Gold Lion at the Cannes

As President Naganuma often says, “Advertising
is a people business.” Human talent is our greatest
asset, and our creative competitiveness derives directlyInternational Advertising Festival, as well as a Grand

from each and every one of our ad creators. Going

Prix (TVCF category) prize at the All Japan Radio andforward, our Creative Division will seek to build a

Television Commercial Federation (ACC), which bestows

ﬂexible framework empowering our creators to freely

Japan’s most prestigious advertising awards. Both thesedemonstrate their individuality and aspire to the next

prizes recognize ADK’s ability to deliver media-neutral

stage in their development.

solutions unhindered by dependence on traditional
advertising techniques. In March 2009, ADK took the
top prize in the Film Lotus category at the Asia Paciﬁc
Advertising Festival (Adfest), which covers all of Asiaand Oceania. At Adfest, we ranked second among
Japanese advertising agencies with respect to thenumber of awards (bronze or higher) received.
The number of prizes awarded to ADK individuals
is also increasing. For example, female copywriter Akiko
Mitsui was selected as a medalist in the 2008 “Creatorof the Year” awards, and ad creator Katsuo Yonezawa
received the Best New Face Award from the Tokyo
Copy Writers Club (TCC). I ﬁrmly believe that these andother young, talented people will become the engine for
ADK’s future growth.

16Creating

Creating “Individuality andSpecialization”

Message from Executive Director, Creative Division

Overview of

ADK’s ofCreative
Projects
Overview
ADK’s Creative
Projects

Buzzoooka
In today’s Internet society, word of mouth has a huge
impact. This project develops and promotes “buzz”

Showcase

communication by creating “news hooks” using the Web
and other innovative tools. One of the techniques used

The mission of this project is to maximize the impactof advertising communications by deploying various
methodologies independently of traditional advertisingat brand launches, for example, is to stir up stories
about the brand among target consumers, encouraging
them to engage with the brand.

techniques. As its name implies, the aim of the projectis to create numerous works that “showcase” the next
generation of advertising.

Yes Menz

Yes-Menz

This is a ﬂexible project in which young ad creators

EX-Project

aged 35 and below gather as necessary to formulate
proposals that reﬂect their individual attributes. In

This project is split into several categories, each ofwhich requires specialist knowledge and skills for
effective advertising expression. The categories include

2009, Katsuo Yonezawa, a member of the project,received the Best New Face Award from the Tokyo
Copy Writers Club (TCC).

ﬁnance, real estate, education and pharmaceuticals.
The project promotes teamwork between the Creative
Division and the Communication Planning Division

f-sideaimed at delivering the best possible solutions forclients.

The mission of this project, which consists of womenad creators, is to develop proposals from the female
perspective. For more about f-side, please read the next
two pages.

17

ADK Annual Report 2008

f-side Project

F-Side Project Activities

Activities

The majority of products on the market are made forf-side is made up of six members, centeringon female ad creators. It develops numerous
communications ideas that embody the sensitivities
of women.
In addition to promoting products for women andwomen. Indeed, women are regarded as the driving

developing related brand communication programs,

force behind consumption, both today and in times

f-side is receiving increasing inquiries from clients

past. In many households, it is the woman who makes

interested in product development and other joint

the ﬁnal decisions on selecting high-priced items for

initiatives.

purchase, such as automobiles and large-scale home

In 2008, copywriter Akiko Mitsui, a member of theelectrical equipment. It is not an exaggeration to say

project, was selected as a medalist in the Creator of thethat the success of a brand is largely decided by how

Year awards.*

well it incorporates the value perceptions of women.
This applies to many types of products, from fashion
items, home electronics equipment and food toautomobiles.

*Creator of the Year: This is an award bestowed by the Japan
Advertising Agencies Association (JAAA) on ad creators who haveexcelled in their work. Each year, up to 10 creators are selected as
medalists, one of whom receives the Creator of the Year award. In
2008, there were six medalists.

f-side members (left to right): Akiko Mitsui, Naoko Takahashi, Yoko Takenouchi, Nozomi Koyano, Naoko Nakajima, Noriko Natsume18

Message from Executive Director, Creative Division

Uplifting Messages for Women:
Campaign for ONWARD 23-ku
In the spring of 2008, f-side created a new campaign for
one of Japan’s major fashion brands, ONWARD 23-ku.
Named after the 23 wards of Tokyo, this brand provides
real clothes for real Tokyo women.
“We wanted to help women live positively throughour campaign,” said Noriko Natsume, a member of the
project team. The project produced a total of 23 TV
commercials to complement the brand name. Copywriter
Akiko Mitsui wrote more than a thousand copy pieces andﬁnally chose 23 that represent the feelings of women,
including the following:

Why do I keep saying I’m ﬁne?
Even though I’m not ﬁne at all.
This copy effectively captures the feelings of women who
always do their best while pretending they are tough. The
ad moved many women, some of whom said they almost
wanted to cry.

Things might not have come my way even if I had waited.
So, I started walking.
This reﬂective but positive thought encourages womento always move forward, never stopping to waste
time waiting for things to appear in front of them. The
campaign included related Web site pages and someclothes on the site that were quickly sold out. Natsume
said, “We believe this campaign contributed signiﬁcantly
to our client’s business. We also received many thanksfrom women, saying they were encouraged by the
campaign.”

19

ADK Annual Report 2008

Corporate Social Responsibility (CSR)
ADK’s basic policy is to take an active role in realizing
a sustainable society. Based on this policy, we havepursued a range of corporate social responsibility (CSR)

Environmental Protection

activities, with a renewed focus on
1. Reinforcing our compliance system

ADK decided to pursue certiﬁcation under ISO14001, an

2. Demonstrating our commitment to environmental

international standard for environmental management

protection

systems, to more effectively address environmental

3. Other social contribution activities that we haveissues. We hope to obtain certiﬁcation across the

pursued over the years

Company within a few years. We announced our “ADKThe task of reinforcing our compliance system isEnvironmental Policy” and chose three divisions to takehandled by the Compliance Committee, a subcommittee

the lead in earning ISO14001 certiﬁcation. They areof the Risk Management Committee. Our environmental

the Promotion Division, the Communication Planning

protection and other social contribution initiatives are

Division and the Research and Development Division.

promoted by the CSR Committee, established in January

After a yearlong effort, those divisions together

2008 under the direct control of the president.

successfully obtained certiﬁcation at the end of 2008.
Other divisions will follow in 2009.

Compliance

Social Contribution

ADK regards compliance as the most important factor inestablishing an effective internal control system, which

The ADK Group Code of Conduct declares that theis now mandated under law.

ADK Group shall strive hard to beneﬁt society in the

Between April and November 2008, thecommunications domain. To this end, the Group shallCompliance Committee conducted training workshops

provide ideas and creative services free of charge

on more than 50 occasions to ensure employees’

where appropriate, working in close cooperation withawareness of the “ADK Compliance Guidelines,” which

public entities and organizations, nongovernmental

conform to the “ADK Group Code of Conduct” and wereorganizations (NGOs) and nonproﬁt organizations

issued in March 2008. Through the workshops, the(NPOs), and outside entities with specialist expertise.

Committee also raised awareness of ADK’s in-house

Guided by this declaration, in 2008 ADK deployed its

reporting system, called the “ADK Group Helpline,”

distinctive capabilities as an advertising company towhich has led to an increase in the number ofpromote the following activities.

employees taking action to report improper behavior.

20

Corporate Social Responsibility (CSR)

CM Planning Course in Ritsumeikan University
In 2008, ADK began offering a television commercial(CM) planning course at Ritsumeikan University
based on a scholarly exchange agreement. Under theagreement, ADK creative staff members in charge of
producing CMs provide lectures on the latest creativetechniques and the current status of the advertisingbusiness. The course received favorable reviews fromthe students and was extensively reported in major
newspapers. ADK will continue this effort in 2009and beyond.
AIDS Prevention Campaign poster featuring a popular rock musician.
This campaign promotes awareness among young people about
getting tested for AIDS.

CM planning lecture at Ritsumeikan University

Pro Bono Creative Work
The Japan Advertising Council* has been hosting annualcompetitions to select creative ideas for its public
advertising campaigns. Each year, the competition

Copy: I hope someday we will stop hearing the word “trash.”attracts hundreds of ideas from advertising agencies

Discarded empty cans and PET bottles are just trash. But if you classify and dispose of them properly, they will be reborn as resources.
This CM was created in the hope that classiﬁcation-based disposal
will become a common habit. Among the Japan Advertising
Council’s CMs, this was the one most frequently broadcast thanks to
its familiar tone.

across the nation. ADK provides the campaigns withunique creative works every year. In 2008, we won thefollowing three campaigns:
1) Campaign to support the Japan Foundation for AIDS
Prevention
2) Campaign to support the Japan Stroke Association
3) Campaign to support the 3Rs** Promotion Group
Network
The CM for the campaign to support the 3Rs Promotion
Group Network conveyed a message that reﬂects ADK’s
commitment to obtaining companywide ISO14001
certiﬁcation for its environmental management systems.

*The Japan Advertising Council was established for the purpose ofcontributing to social welfare through the communicative and persuasive art of advertising. It promotes public advertising campaigns
nationwide using ads aimed at encouraging people to act in the
public interest.
**“The 3Rs” comes from “reducing, reusing and recycling,” whichmeans reducing trash by reusing and recycling used products.

21

ADK Annual Report 2008

Corporate Governance and Internal Control
responsibilities of all areas of the Company’s activities

Corporate Governance Policy

and implements speedy and agile decision making on

ADK believes that the ultimate objective of asupervisory function, because the committee system

corporation should be to maximize value for its

has not been proven superior, ADK will ensure propershareholders by generating sustained growth. It ismanagement supervision via its corporate auditor

fundamental for corporations to motivate and monitor

system.

the spot, while exchanging signiﬁcant information.
With regard to reinforcing the management

management teams to work toward this objective, in

We have limited the tenure of directors to one year.

order to constantly raise corporate value and ultimately

This enables us to better clarify the responsibilities ofenhance competitiveness. Therefore, effective corporate

directors and gives us greater opportunity to gauge thegovernance plays an essential role in this context.

trust of shareholders. At present, we have 14 directors,

Among the various stakeholders including

two of whom have representative status under

employees, the board of directors of a corporation

Japanese law, with 11 serving as operating ofﬁcers

must try to obtain the best balance among complex(as of March 27, 2009).

interest relationships. However, because a publicly

The Board of Directors meets once a month, inlisted company seeks broad access to capital markets

principle, and more often as necessary. In ﬁscal 2008,

for fund-raising, and because the authority of thethe Board met 18 times. On two occasions, the Board

board of directors is awarded by the shareholders, whorequested the attendance of accounting auditors toultimately provide the capital, shareholder value andreceive direct reports of the results of the accounting

shareholder rights must be prioritized.

audits.

ADK executes its various corporate governanceInternal audits are conducted by the Group Audit

strategies based on these ideas. We preserve group-

Ofﬁce, which reports directly to the president and had

wide corporate governance, while maintaining closea staff of seven as of March 30, 2009.

links between ADK and the other companies of the
ADK Group.

ADK has four corporate auditors, three of whomare external. One of the three is a lawyer and serves
on a part-time basis. As of March 30, 2009, the ADKGroup did not contract with him for his legal services.
The Group has also established a policy not to do so in

Corporate Governance System

the future, to honor that person’s independence as anauditor. The internal auditor is a full-time auditor. The
three full-time corporate auditors attend all Board of

ADK has adopted the corporate auditor system

Directors meetings. The Board of Corporate Auditors

because it is most suitable for two aspects of corporate

met 10 times in ﬁscal 2008. There are no full-timegovernance: (1) enhancing management decision-

employees assigned to the corporate auditors.

making efﬁciency and (2) reinforcing the management
supervisory function.
With regard to enhancing the efﬁciency ofmanagement decision making, we have decided against

between ADK and Yasumori or ADK and the executiveof Yasumori responsible for auditing ADK’s accounts.

the committee system, in which the Board of Directors,

With respect to the business execution andcentered on outside directors, retains certain decision-

management supervisory frameworks, ADK has

making authority. We believe the current corporate

appointed operating ofﬁcers from among its executive

auditor system is more efﬁcient because the Board

directors and employees. Operating ofﬁcers are chargedof Directors, centered on internal directors, shares

22

ADK uses Yasumori Audit Corporation as its
independent auditor. There is no conﬂict of interest

Corporate Governance and Internal Control

with business execution related to broader decisions

personal consumer information collected in the course

made by the Board of Directors.

of undertaking marketing and campaign activities.

The business execution organization is separated

The Information Security Committee handles operation

into functional groups, divisions, departments and smallof the ADK Group’s entire information security

groups, all reporting to the president.

management system, to ensure proper management

The Management Strategy Committee helps decisionof personal and other business information. Its tasks

making by the president, who has the ultimate authority

include the acquisition of the ISO27001 certiﬁcation.

of day-to-day operations. Consisting of operating

The Business Continuity Committee sets up various

ofﬁcers in charge of divisions, the Committee meetsprocedures aimed at ensuring the continuation ofalmost three times a month (29 times in ﬁscal 2008) tobusiness during times of emergency, such as major

submit information and exchange opinions on importantearthquakes or power stoppages. The duty of thematters. Full-time corporate auditors also attend suchBusiness Process Committee is to meet internal control

meetings to monitor the relevance of items discussed.

reporting system requirements under the Financial

To ensure common recognition and transparency ofInstruments and Exchange Law of Japan.

important issues among the employees, excerpts ofmeeting minutes are posted on the Company’s intranet.

Internal Control
Risk Management

ADK is building a group-wide internal control system,
spearheaded by the Risk Management Committee. One

In May 2006, the Board of Directors passed a resolutionof its subordinate organizations, the Business Processconcerning the “Basic Policies for Establishing an

Committee, specializes in setting up an internal control

Internal Control System,” and decided to set up areporting system as stipulated under the Financialgroup-wide internal control system headed by theInstruments and Exchange Law of Japan.

Risk Management Committee, which is chaired by theThis internal control reporting system becomespresident. The risk management system includes theeffective during ﬁscal 2009. In the year under review,“Regulations and Systems Relating to Risk Management”

we undertook trial evaluations of the operational

and is consistent with internal control systems aseffectiveness of internal control frameworks establisheddeﬁned under the New Corporate Law in Japan.

and worked to modify and correct problems uncovered

The Risk Management Committee heads ﬁvethrough those evaluations. We will continue striving tosubordinate organizations, each of which undertakes its

improve our internal control system.

own speciﬁc risk management. They are the Compliance
Committee, the Personal Information Protection
Committee, the Information Security Committee, theBusiness Continuity Committee and the Business
Process Committee.
The Compliance Committee is responsible forcreating systems to prevent illegal acts and for
operating ADK’s internal reporting system. The jobof the Personal Information Protection Committee isto establish systems aimed at preventing accidents
from happening when handling the large volumes of23

ADK Annual Report 2008

Basic Philosophy andStatus of the Implementation ofInternal Control
as of April 13, 2009

Speciﬁc Rules
1. System to Ensure Directors and Employees Perform
Their Duties in Accordance with Laws, Regulations,
Ordinances and the Articles of Incorporation

The following is an English translation of a section of

The Board of Directors formulated the “ADK Group’s

the Corporate Governance Report for informational

Code of Conduct” to clarify the ethics and values to be

purposes only. This section is about the basic

shared by all directors and employees. The directors

philosophy and the status of implementation of internalthemselves observe this code, and the chairman and thecontrol. The original Corporate Governance Report waspresident continuously reiterate its spirit to employees.

written in Japanese and ﬁled with the Tokyo Stock

The Risk Management Committee appoints the

Exchange. In the event that any discrepancy exists

Compliance Committee as a subordinate organization

between the translation and the Japanese original, thechaired by the director in charge of compliance;latter shall prevail.

its members shall include external attorneys. The
Compliance Committee implements policies to raisecompliance awareness among directors and employees,
investigates major violations of laws and regulations

General Rules

or suspicion of violations, and instructs the responsible
departments to take corrective actions. The Compliance

Based on the “Management by All” principle that has

Committee also operates the “Helpline System,” which

guided ADK since its establishment, we have developed

involves external law ofﬁces and guarantees anonymity

an internal control system with the following aims:

to encourage employees to report violations of laws

(1) Raise operational effectiveness and efﬁciency;

and regulations in order to prevent and correct such(2) Maintain the reliability of ﬁnancial reporting;violations.

(3) Ensure compliance with laws and regulations relating

Business Process Committee, chaired by the director in(4) Safeguard assets.

charge of the maintenance and control of the system

Development of the internal control system is overseen

for ensuring the reliability of ﬁnancial reporting, as

by the Risk Management Committee, which is chaired

a subordinate organization. The task of the Businessby the president. The Risk Management Committee

Process Committee is to ensure that business execution

regularly investigates if the system effectively

complies with laws and regulations, especially pertaining

functions, using a process management method based

to the system for ensuring the reliability of ﬁnancial

on the PDCA (Plan, Do, Check, Act) cycle, and reports its

reporting. To this end, the Business Process Committee

results to the Board of Directors.

instructs relevant departments to adopt measures for

The elements of resolution stipulated in the24

The Risk Management Committee also appoints theto business activities; andsetting up appropriate business processes and related

Company Law and the enforcement regulations of theprovisions, with the aim of clearly conveying

Company Law are described in the following rules.

to employees how business should be executed.

Corporate Governance and Internal Control

2. System Regarding the Retention and

the Compliance Committee and the Business Process

Management of Information Related to theCommittee, the Personal Information Protection

Execution of Duties of Directors

Committee, the Information Security Committee and the

The following policies have been put in place under theBusiness Continuity Committee have been establishedsupervision of the director in charge of the informationas specialist committees to implement risk management

management system with regard to the retention andin their respective ﬁelds. Other specialist committees

management of information related to the execution ofshall be established as needed. The Risk Management

the duties of directors.

Committee directly implements risk management in the(1) The minutes of the Board of Directors meetings andﬁelds not covered by the specialist committees.

the materials distributed to directors for deliberation of

The Audit Ofﬁce monitors the effectiveness ofresolutions shall be retained for a minimum of 10 years

the risk management system and reports to the Riskin the division in charge of the secretariat.

Management Committee.

(2) The minutes of regular meetings that directors must
attend, as well as other business documents approved by

4. System to Ensure thedirectors or in which their opinions are written, shall be

Effective Execution of Directors’ Duties

managed in compliance with the “Document Management

The Company maintains an appropriate number ofRegulations” and the “Information Security Policy.”

directors in order to ensure the ﬂexible holding of andactive discussions at the Board of Directors meetings.

3. Regulations andSystems Relating to Risk��������������

The Risk Management������������������������������������

������������

Management��������������������

������������

Committee deﬁnes
the “Risk Management
Policy” and implements
comprehensive risk
management for the entire
ADK Group, consisting of
ADK and its subsidiaries.

�������������������������������
�����

�����
��������
������������������

risk management by using
a process management
method and instructs
responsible departments
to take necessary
measures.
Under the control��������������
��������

�������
���������

������������������

���������

��������������
���������
�������������������

�����������

�������������������

������

�������

The Risk Management
Committee implements�����������������������

�������

�����������������������

����������������

�����������������

�����������������������������
�������������������������
������������������������������
�����������������������������������������
�����������������������������
��������������������
��������������������������

������������

������������������

��������������
���������
��������

��������
����������
�������

������������
�����������
��������������

�������

���������������
�����������������
�����������

�������

�������������������������������

of the Risk Management
Committee, in addition
to the aforementioned�������������������������������������

Corporate Governance, Internal Control and Risk Management Framework

25

ADK Annual Report 2008

The Company also limits the tenure of each director toCommittee regularly, at least once a year, and more

one year in order to frequently check the qualiﬁcation

often as necessary.

of directors.
The Company has set up an operating ofﬁcer

6. System for Employees When Requested

system to clarify the different duties of operating

to Support the Corporate Auditors andofﬁcers and the members of the Board of Directors. As

Their Independence from Directors

the Japanese Corporate Law stipulates, the Board has

In the event that the corporate auditors request thethe authority to resolve and supervise the execution ofassistance of employees, the Company assigns thebusinesses strategies, whereas the operating ofﬁcers

appropriate persons as assistants to the corporate

execute such resolved business strategies and report

auditors as soon as possible. To reinforce independence

the development and results.

from the directors, the employees to assist the

The Board of Directors sets companywide goals

corporate auditors shall not be assigned to interlocking

for directors and employees to share and establishes

duties in the organization under the authority of

medium-term and annual business plans to achieve

directors. Performance review, personnel transfer andthese goals. Progress is reported on a quarterly basis

decisions on reward and punishment must be approved

to the Board of Directors. In case there are factors

in advance by the Board of Corporate Auditors.

that hinder progress toward these goals, the executive
director in charge of the relevant department takes

7. Reporting to the Corporate Auditors andresponsibility for formulating solutions, and the

System to Ensure the Efﬁcient Execution of Audits

president carries them out by giving directions to

The Company has a policy to maintain four or more

the relevant departments.

corporate auditors in total, three or more outside
corporate auditors and three or more full-time

5. System to Maintain Appropriate Business Practices
Throughout the ADK Group26

corporate auditors—exceeding the legal requirement.
In addition to the Board of Directors meetings,

Under the supervision of the Risk Management

the attendance of corporate auditors is requested

Committee, the division in charge of management of

at Business Strategy Meetings, Performance Reportsubsidiaries directs each subsidiary to maintain its own

Meetings and other important regular meetings, andinternal control system and establishes a group-wide

the minutes of those meetings must be presented tointernal control system by requesting that subsidiaries

all corporate auditors. If corporate auditors request

comply with the “ADK Group’s Code of Conduct” andattendance at any other meetings, directors andimplement speciﬁc measures.

employees shall not refuse the request. Directors and

The division in charge of management of

employees shall report immediately to the corporate

subsidiaries makes arrangements with major

auditors on cases that may cause serious damage tosubsidiaries about approval and reporting, makes it

the Company; inappropriate actions in the execution

mandatory to gain approval from or report to ADKof duties by directors; material facts that breach laws,

before making decisions regarding certain mattersregulations and the Articles of Incorporation; reports

and manages them while respecting each subsidiary’s

received through the Helpline System; or results of

independence.

inspection by the regulator or external audit. At least

The division in charge of management of

twice a year, the president holds a meeting to exchange

subsidiaries also reports on the status of internal

opinions with the corporate auditors. The Group Audit

control of the subsidiaries to the Risk Management

Ofﬁce supports the audit of the corporate auditors. The

Corporate Governance and Internal Control

audit reports of the Group Audit Ofﬁce are submitted

2. Improvement of Internal System

to the Board of Corporate Auditors, as well as the(1) Section in-charge of supervising and assignment ofpresident. The members of the Group Audit Ofﬁcea manager in charge of preventing an unfair request

attend meetings of the Board of Corporate Auditors to

We assign the Corporate Governance Ofﬁce, an

cooperate with the corporate auditors.

administrative ofﬁce for the Compliance Committee,
as a supervisory section to handle issues related toantisocial forces. The Ofﬁce strives to participate
in training sessions held by the National Center for
the Elimination of Boryokudan (crime syndicate) for

Basic Concept and System to Exclude
Antisocial Groups

managers in charge of preventing unfair requests.
(2) Collection and management of information on
antisocial forces

1. Basic Concept, the Code of Conduct andWe ﬁle the information obtained from the speciﬁc

Improvement of Internal Rules

violation prevention conference we belong to andAs a corporation has a larger economic scale compared

distribute it among the sections concerned. If there is

to individuals, an adverse impact may be signiﬁcant if

a doubt that individuals or groups with whom a certain

it is used by antisocial groups. Thus, it is an obligation

section contacts in its daily business would have anof the corporation not to take any action that could

antisocial nature, we make an inquiry through thebe beneﬁcial to antisocial groups. The “ADK Group’s

supervisory section to the appropriate police ofﬁce,

Code of Conduct” stipulated by the Board of Directors

the Ofﬁce of Speciﬁc Violation Prevention Association

clearly documents the concept and declares that “Theunder the Metropolitan Police or an inquiry agency.

Group shall maintain no contact with anti-social groups,(3) Collaboration with external professional

and will staunchly decline any requests from them” inorganizations

the provision of the Article entitled “To adopt to social

In case we have contact with individuals or groups

norms and ensure social justice.”that could belong to antisocial forces, we consult with

Our Compliance Committee establishes the “ADK

the appropriate police ofﬁce and our legal adviser andCompliance Guidelines,” which concretely expresses

adhere closely to their instruction.

the spirit of the “ADK Group’s Code of Conduct.” In(4) Implementation of training sessions

the guideline, there is a description explaining the

The “ADK Group’s Code of Conduct,” the “ADK

necessity of the “Exclusion of relationship with the anti-

Compliance Guideline” and the “Manual of Handlingsocial groups” and how to do it. The “ADK Compliance

Unfair Requests from Antisocial Groups” are uploaded

Guideline” is distributed as a handbook to all employees.

onto the intranet, allowing all employees to read themFurthermore, we created the “Manual of Handlinganytime. We also hold in-person training sessions at

Unfair Requests from Antisocial Groups,” which

the time of new employee training and new manager

describes concrete procedures, steps, and internal

training where the administrative ofﬁce of theand external collaboration in case antisocial groups

Compliance Committee serves as the lecturer and theapproach us. For the purpose of thorough dissemination“ADK Compliance Guideline” is used as a textbook, asof the information among employees, the manual iswell as at the meetings in each organization.

uploaded onto our intranet allowing all employees toaccess and read it anytime.

27

ADK Annual Report 2008

Corporate Governance and Internal Control

Moreover, in the event that such purchaser does

Takeover Defense

not provide necessary information or it is deemedthat such proposal may damage the corporate value
and the common interests of the shareholders, theAt ADK, we believe that management authority,

Board of Directors will take reasonable and effective

including important ﬁnancial and business strategies,

countermeasures.

let alone that for shareholders’ return and takeover
defense, should be ultimately awarded to and approved

implement speciﬁc takeover defense measures inby the shareholders.

advance, in consideration of the future economic

In addition to the improvement of capital efﬁciency
and the implementation of various measures to return
proﬁts to shareholders, the Company has madecompany-wide efforts to maximize corporate value
and the common interests of shareholders based on
our “Management by All” principle. In the advertisingindustry, which is often described as a “People
Business,” the Company believes that management withsuch a company-wide sense of unity and a sense ofcommon destiny among directors and employees is thebest defense against an inadequate takeover, and theCompany has not implemented any speciﬁc takeover
defense measures at present.
On the other hand, in the event of a large-scalepurchase of the Company’s shares or a takeoverproposal, the Board of Directors, which assumes
management responsibility for the shareholders, willassess the impact of such purchase on the corporate
value and the common interests of the shareholders,
while respecting the opinions of outside specialists. In
addition to expressing its views, the Board of Directors
will negotiate with such purchaser and do its best to
provide necessary information and ensure sufﬁcient
time for shareholders to properly judge whether toaccept such purchase.

28

The Company will carefully discuss whether toenvironment, the capital markets, and trends in laws
and regulations.

Board of Directors and Auditors
Masao Inagaki

Yoji Shimizu

Yoshiki Uemura

Representative Director
Chairman

Executive Director
Senior Operating Ofﬁcer
Account Services

Executive Director
Operating Ofﬁcer
Creative

Koichiro Naganuma
Representative Director
President & Group CEO

Hideaki Hirose
Executive Director
Senior Operating Ofﬁcer
Domestic Network

Takeo Hishiyama
Executive Director
Senior Operating Ofﬁcer
Communication Planning &Group Business

Kazuhiko Narimatsu
Executive Director
Operating Ofﬁcer
Account Services

Jiro Kitamura
Executive Director
Operating Ofﬁcer
Promotion

Non-Executive Director
Group Chief Executive
WPP plc

Yoshiro Sakai
Corporate Auditor

Yuzo Shikata
Corporate Auditor

Osamu Okayasu
Executive Director
Operating Ofﬁcer
Account Services

Kenji Mori
Executive Director
Senior Operating Ofﬁcer
Account Services

Sir Martin Sorrell

Toshiyuki Inoue

Makoto Ichikawa
Corporate Auditor

Hideshige Haruki
Corporate Auditor

Executive Director
Operating Ofﬁcer
Media & Content Business

Hideyuki Nagai
Executive Director
Senior Operating Ofﬁcer
Media & Content Business

Shinichi Ueno
Executive Director
Operating Ofﬁcer
Corporate

Operating Ofﬁcers
Yasuto Horie

Hiroshi Nomiyama

Takeshi Kato

Katsuhiro Ikuma

Hiroshi Nakazato

Akio Yoshi

Hidekatsu Ikedo

Huang Hui

Takashi Fukuzaki

Ryuji Yokoyama

Chikara Yoshioka

Toshiyuki Kurayoshi

Osamu Ishikawa

Makoto Nakamura

Ritsuo Fukazawa

Hiroaki Onohara

29

ADK Annual Report 2008

Management’s Discussion and Analysis
Performance Highlights of Fiscal 2008
Consolidated Gross Billings Down 8.2% to ¥399.4 billion
Gross Margin Improved to 12.3%
Gross Proﬁt Down 5.0% to ¥49.1 billion
Operating Income Down 48.1% to ¥3.6 billion
Net Income Down 60.3% to ¥2.1 billion
EPS Down to ¥48.14

ADK Group Overview

Consolidated Performance

As of the end of 2008, the ADK Group consisted of

Gross Billings

48 subsidiaries (44 in advertising and four in non-In ﬁscal 2008, under the global ﬁnancial crisis, the ADK

advertising) and 22 afﬁliates (21 in advertising and one

Group generated gross billings of ¥399,452 million,

in non-advertising). The Group includes 23 consolidated

down 8.2% from ﬁscal 2007. ADK (the parent company)

subsidiaries and three equity-method afﬁliates. For

accounted for 89.8% of consolidated gross billings. In

more details on group companies, please see page 3.

the year under review, ADK generated non-consolidated

Our global reach extends to 21 cities and isgross billings of ¥358,595 million, down 7.5% year on

reinforced by a close alliance with WPP plc, which leads

year. The reasons for the decline were mainly negative

the world’s largest communications group.

growth in gross billings of the media buying businessIn ﬁscal 2008, the Group’s advertising businessgenerated gross billings of ¥391,229 million, equivalentand fewer new customers. For more details, please referto the “Segment Information” section.

to 97.9% of consolidated total billings. Other businesses
generated ¥8,222 million, or 2.1% of total billings. The
ADK Group’s non-advertising business consists ofbook and magazine publishing and sales, as well as

Consolidated Gross Billings and Selected Proﬁtability Data

information processing services.

Millions of Yen except per commonshare amounts and ﬁnancial ratios

All overseas sales of the ADK Group weregenerated by the advertising business. Together,overseas sales represented 6.2% of consolidated grossbillings.
The number of employees at the end of ﬁscal

2007

2006

¥399,452 ¥435,011 ¥420,059

Gross margin

12.3%

11.9%

Operating margin

7.5%

13.8%

Income before income taxes ¥3,775 ¥ 10,122 ¥

9,682

2,125 ¥

5,070

2008 totaled 3,264, up 49 from a year earlier. The

Net income

number of employees engaged in the advertising

Net income per share (Yen) ¥business segment was 3,185, up 62.

30

2008
Gross billings¥

5,350 ¥

11.6%
13.1%

48.14 ¥ 116.40 ¥ 106.62

Management’s Discussion and Analysis

Gross Proﬁt

million in income taxes and ¥8 million in minority
interest, net income was ¥2,125 million, down 60.3%

The gross margin improved 0.4 percentage point toyear on year. Net income per share totaled ¥48.14,

12.3% mainly because of enhanced proﬁtability in thedown 58.6%.

media buying business of ADK. However, because of
the decline in gross billings, gross proﬁt decreased 5.0%
year on year to ¥49,143 million.

Balance Sheet and Cash Flow
Assets and Liabilities

Operating income

Although the ADK Group’s capital expenditures during

Because of limited ﬂexibility in operating expenses,

ﬁscal 2008 increased to ¥2,065 million, up ¥1,457

operating income declined 48.1% to ¥3,699 million. The

million from ﬁscal 2007, for investment in IT and theoperating margin was 7.5%, disappointingly lower thanpurchase of OOH media overseas, the Group accelerated

management’s target of 15%.

its share buyback program and continued its efﬁcient
capital management program focus. Because of the

Other Income and Expenses

global ﬁnancial crisis, stock prices declined sharply andthe yen appreciated signiﬁcantly, causing the values of

Other income decreased 97.5% to ¥76 million mainly due

the Group’s investment securities to plunge. At the end

to a smaller gain on sale of securities, the provision forof ﬁscal 2008, the Group had total assets of ¥191,782

retirement beneﬁts to directors and corporate auditors

million, down ¥54,314 million from a year earlier. The

at subsidiaries, and a larger exchange loss than a year

decline was mainly due to a decrease in accounts

earlier. The gain on sales of investment securities waspayable—trade and a decline in investment securities.

¥1,427 million, and the loss on sales of securities was

Consolidated interest-bearing debt at the ﬁscal year-¥27 million. The loss on valuation of securities losses

end was ¥1,044 million. Total shareholders’ equity,

totaled ¥1,965 million. The ADK Group posted equity

including the net valuation gain on hedging derivatives

in proﬁts of afﬁliates—net of ¥648 million because

but excluding minority interests, stood at ¥100,588

Digital Advertising Consortium Inc., a publicly tradedmillion, with a 52.4% ratio of shareholders’ equity toInternet media buying rep, reported higher gross proﬁt

total assets.

than the previous year and turned to proﬁtability. In
addition, another equity-method afﬁliate in information

Cash Flowprocessing services reported larger net income, thanks

At the end of ﬁscal 2008, cash and cash equivalents

mainly to a gain on sale of investment securities. The

totaled ¥12,807 million, a decrease of ¥5,187 million

Group reported a ¥1,111 million foreign exchange loss.

from the previous ﬁscal year-end.

The exchange loss was larger than in ﬁscal 2007 mainly

Net cash used in operating activities amounted

because at the intra-group transactions adjustment,to ¥3,181 million compared with net cash provided by

the translation was made at the end-of-year rate,

operating activities of ¥183 million in the previous

decreasing the consolidated cost of goods sold by ¥741

ﬁscal year. Major items included ¥3,774 million in

million and increasing the exchange loss by the same

income before income taxes and minority interests

amount.

and ¥803 million in depreciation, as well as a ¥5,421
million decrease in notes and accounts receivable

Net Income

and an ¥8,385 million decrease in notes and accounts
payable. In addition, there was a ¥6 million decrease

Income before income taxes and minority interests

in inventories. Taxes paid totaled ¥4,065 million, a

totaled ¥3,775 million. After deductions of ¥1,641

relatively high ﬁgure reﬂecting the Group’s large taxable
income in ﬁscal 2007.

31

ADK Annual Report 2008

Net cash provided by investing totaled ¥7,085

common dividends, with a minimum annual dividend

million compared with ¥4,488 million in ﬁscal 2007.

of ¥20.00 per share. ADK makes semiannual dividend

Major components included proceeds from sales of

distributions instead of quarterly distributions in ordersecurities of ¥13,334 million and purchases of securities

to save on operational costs. Under this policy, theof ¥5,561 million. Although the absolute amount ofCompany declared a year-end dividend of ¥10.00 per

purchases of property and equipment and purchases

share, bringing the total annual dividend to ¥20.00 perof intangible assets were not very large, they wereshare, as shown below:

relatively larger during ﬁscal 2008 at ¥745 million and¥1,319 million, respectively, mainly due to investments

FY2008 Dividends

in OOH media overseas and IT at the parent.
Dividend per share

Net cash used in ﬁnancing activities was ¥7,853

InterimYear-end

Total

¥10

¥10

¥20

million compared with ¥8,968 million in ﬁscal 2007.
Major components were ¥1,883 million in dividends

In addition to cash dividends, ADK has been

paid and ¥5,885 million in purchases of treasury stock—acquiring its own stock since 2001. Our plan here isnet, reﬂecting the Company’s strong commitment toto improve EPS by reducing the number of sharesshareholder return.

outstanding and curtailing the growth of equity. In theevent that the targeted number of shares cannot bebought back, the Board will consider increasing cash

Capital Expenditures and Depreciation
Millions of Yen

2008

20 07

CapitalCapitalexpenditures Depreciation expenditures Depreciation

Buildings

ADK bought back 2,003,030 shares and purchased oddlot shares valued at ¥5,885 million. Accordingly, total
shareholder return—the sum of shares bought back and

88

¥148

¥138

¥ 158

Building improvements

0

3

0

3

total cash dividend payments—was the equivalent of

Vehicles

23

32

40

40

317.9% of net income.

Furniture, ﬁxtures andequipment

633

189

122

161

Land

0

0

0

0

Licenses

31

6

0

52

Computer software¥

dividends to bolster shareholder return. In ﬁscal 2008,

1,287

414

304

744

Other

0

8

0

10

Total

¥2,065¥803¥607¥1,170Free Cash FlowMillions of Yen

2008
Net cash provided by operating activities ¥ -3,181
Business reinvestment*-2,031
Free cash ﬂow¥ -5,212

2007
¥ 183
-581
¥-398

*Business reinvestment = purchase of property and equipment + purchase of intangible
assets – sales of property and equipment

Dividend Distribution Policy
and Share Buyback

Segment Information
Advertising Business Segment
The Group’s advertising business generated grossbillings of ¥391,229 million, registering an 8.2% yearon-year decline. Segment operating income decreased
47.5% to ¥3,748 million.

1. ADK’s Non-Consolidated Performance
Information
Because all of ADK’s non-consolidated gross billings andMaximizing shareholder value is a top priority at

income are generated from the advertising business,

ADK. Under our dividend distribution policy, 35% of

and those non-consolidated gross billings represent

consolidated net income is to be distributed through91.7% of consolidated advertising gross billings, thenon-consolidated performance is reviewed below.

32Management’s Discussion and Analysis

Non-Consolidated Performance Summary
Millions of Yen

2008

2007

Gross billings¥358,595¥387,860-7.5%

Gross proﬁt

38,64040,678-5.0

Operating income

2,463

6,172

-60.1

5,330

-67.7%Net income

¥

1,721

¥

ChangeNon-Consolidated Performance by Division

In 2008, total magazine advertising expenditures fell
sharply, down more than 10% year on year, whereas
the number of suspended publications was the second
highest in history, after 2007. Under these conditions,
ADK’s Magazine Division suffered a 16.4% year-on-year
decline in gross billings to ¥23,737 million. This was due

Millions of Yen

to lower billings to clients in the Cosmetics/Toiletries
sector and the negative impact of competition from��������

������������
������

Magazine Division

digital media.

���������

�����������������������������
���������������

�������������
������
（����）

��������������

������������������

����

��
��

���������
�����������
������������

���������
��������������

������ ������ ������ ������ ������ ������

��
�����

Gross billings Composition Change
Media

Newspaper Division

Magazine¥ 23,737

6.6% -16.4%

The domestic newspaper advertising market remained

Newspaper

30,376

8.5-11.1

depressed in 2008, with advertising expenditures downTV

162,453

45.3

-8.7

more than 10% year on year. ADK’s Newspaper Division

3,710

1.0

-16.7

reported an 11.1% decline in gross billings to ¥30,376

Internet & mobile media

13,4673.8-0.3

OOH media

12,097

3.4

4.4

million, stemming mainly from lower billings to clients¥245,843

68.6%

-9.0%

Radio

Subtotal
Non-media
Sales promotion¥ 57,434

16.0%

-0.9%

Creative and others

55,31815.4-7.5

Subtotal

112,752

31.4

-4.3

¥358,595

100.0%

-7.5%

Total

Notes:
1. The data in the table above show the gross billings by each division instead of by
medium. Because each division offers cross-media solutions, the data may not represent
gross billings by medium.
2. The gross billings by division are rounded down. Therefore, their sums do not equal
the total or the subtotals.

in the Finance/Insurance and Automobile/Automobilerelated products sectors.
������������������������������
���������������

���������
��������������

������������������

����
��
��
�

������

������

������

������

33

ADK Annual Report 2008

Television Division

Radio Division

In addition to time (program-sponsored) and spot

The radio advertising market continued to shrink inads, the Television Division derives revenue from the2008. The Radio Division reported ¥3,710 million incontent business, highlighted by animation programs.

gross billings, for a year-on-year decline of 16.7%. ThisIn the year under review, the division generated adecrease was mainly due to lower billings to clients inslight decline in gross billings from program-sponsoredthe Automobile/Automobile-related products sector,

ad sales, mainly due to lower billings to clients in thewhich is the largest source of revenue for the division.

Finance/Insurance and Restaurants/Other services
sectors. This was despite higher billings to clients in the��������������������������
���������������

Information/Communications, Foods and Automobile/
Automobile-related products sectors. Spot ad sales���������
��������������
������������������

����

��

decreased signiﬁcantly due to lower billings to clientsin the Cosmetics/Toiletries, Restaurants/Others,��

Automobile/Automobile-related products and Electric�machines/AV equipment sectors.

�����

�����

�����

�����

�����

With respect to content-related sales, ADK beganselling animation content via PC sites and mobile
phones, stepped up sales of new and old programs
overseas, and promoted sales of DVDs. Due to the yen’s

Internet & Mobile Media Divisionappreciation, however, overseas sales of animation

The Internet & Mobile Media Division continued

programs declined.

generating higher gross billings to clients in the

As a result, the Television Division yielded grossEducation/Healthcare services/Religion sector bybillings of ¥162,453 million, an 8.7% year-on-year

offering cross-communications programs and closer

decline.

relationships with media owners, as well as enhanced
services via ADK Interactive, Inc., a newly established�������������������������������
���������������

���������
��������������
������������������

�����

��

digital media sales subsidiary. Because a large contract
with a major customer ended during the year, however,gross billings for the division edged down 0.3% to¥13,467 million.

���������

�������

�������

��������������������������������

�������

���������������

���������
��������������

������������������

����
��

Television Division:
Non-Consolidated Gross Billings by Category
Millions of Yen

2008

Change-1.1%

Spot88,552 100,821-12.2

Content-related sales

11,49914,037-18.1¥162,453 ¥177,965

-8.7%

Total

34

2007

Time (program-sponsored ads) ¥ 62,401 ¥ 63,106

��
�

�����

�����

�����

������

������

Management’s Discussion and Analysis

Out-of-Home Media Division

Creative and Other Divisions

In ﬁscal 2008, the Out-of-Home Media Division

The Creative Division continued helping and educating

generated increased gross billings by offering a range

younger creators to enhance their ability to designof integrated services. These included sales promotion

integrated communications programs with deep insights

campaigns and cross-media solutions, as well as

into every medium. In addition, the division focused

developing billboards and in-store media, mainly to

on several growing markets, such as real estate, andclients in the Electric machines/AV equipment andattracted new business as a result. The Marketing

Automobile/Automobile-related products sectors. As a

Division also generated higher gross billings. However,result, the division generated a 4.4% increase in grossthe combined gross billings of the two divisions andbillings to ¥12,097 million.

other miscellaneous advertising businesses decreased
7.5% to ¥55,318 million, due to shrinking advertising������������������������������
��������

���������������

���������
��������������

budgets among various clients.

������������������

����
��

�������������������������������
���������

���������������

���������
��������������
������������������

�����

��

��
�

�����

�����

������

������

���������

������

������

������

Sales Promotion Division
The Sales Promotion Division generated gross billings of¥57,434 million, down 0.9%. The slight decline stemmed
mainly from lower billings to clients in the Distribution/
Retail, Information/Communications and Automobile/
Automobile-related products sectors. This contrasted
with higher billings to customers in the Beverages/
Tobacco products and Classiﬁed ads/Other sectors,
reﬂecting ADK’s more integrated solutions and faster,
less costly and more sophisticated ideas.
������������������������������������
���������������

���������
��������������
������������������

�����

��
��
�

������ ������ ������ ������ ������ ������

35

ADK Annual Report 2008

Non-Consolidated Gross Billings,
Market Share and Industry Ranking (1999—2008)
Millions of Yen

Year

Gross billings

ChangeMarketshare*

Industry
rank

1999

¥320,085

4.6%

5.62%

3

2000

340,888

6.5

5.57

3

2001

358,830

5.3

5.92

3

2002

334,915

-6.7

5.87

3

2003

357,597

6.8

6.29

3

2004

373,897

4.6

6.38

3

2005

384,849

2.9

5.64

3

2006

378,804

-1.6

5.46

3

2007

387,860

2.4

5.53

3

2008

¥358,595

-7.5%

5.36%

3

*Market share: According to “Advertising Expenditures in Japan ” reported by Dentsu Inc. The scope of
this report was expanded from 2006 to reﬂect the effect of the rapid expansion of the Internet andpromotional advertising.

Gross Billings: Breakdown by Client Industry(Non-consolidated)

Millions of Yen

2008
Energy/Raw Materials/Machinery

3,901

1.1%

Foods

29,575Beverages/Tobacco Products

22,804

Pharmaceuticals/Medical Supplies

2007¥

Composition
ratio

4,985

1.3%

8.2

32,631

6.4

25,14012,8003.6

Cosmetics/Toiletries

34,652

Apparel/Jewelry
Precision Instruments/Ofﬁce Equipment

Change¥ -1,084-21.7%

8.4-3,022-9.3

6.5-2,336-9.3

15,2393.9-2,439-16.0

9.7

38,3919.9-3,739-9.7

12,6193.5

13,303

3.4

-684

-5.1

4,493

1.3

6,230

1.6

-1,736-27.9

Electric Machines/AV Equipment

5,923

1.7

9,149

2.4

-3,270-35.6

Automobiles/Automobile-Related Products

22,698

6.3

24,882

6.4-2,183-8.8

Household Products

3,494

1.0

1,898

0.5

1,596

84.1

Hobbies/Sporting Goods

22,466

6.3

20,308

5.2

2,034

10.0

Real Estate/Housing

12,837

3.6

13,775

3.6-1,359-9.6

Publications

3,929

1.1

3,554

0.9

375

10.6
-1.2

Information/Communications

44,031

12.3

44,59411.5-520

Distribution/Retail25,847

7.2

25,762

6.6

86

0.3

Finance/Insurance

34,371

9.6

40,692

10.5-6,321-15.5

Transportation/Leisure

15,573

4.3

13,285

3.4

2,285

17.2
-46.1

Restaurants/Other Services

9,028

2.5

16,750

4.3-7,726

Government/Organizations

9,662

2.7

9,387

2.4

696

7.8

Educational/Health Care Services/Religion

5,065

1.4

3,976

1.0

1,089

27.4

Classiﬁed Ads/Other

22,828

6.4

23,9306.2-1,006-4.2¥358,595

100.0%¥387,860

100.0%

Total

36

¥

Composition
ratio¥ -29,264-7.5%

Management’s Discussion and Analysis

2. Group Companies in theAdvertising Business
The ADK Group’s advertising agency companies

Outlook for Fiscal 2009

had mixed results. Domestic subsidiaries as a whole
reported lower gross billings than the previous year
and incurred operating losses under stagnant market
conditions. Overseas subsidiaries as a whole reported

Fiscal 2009 First-Quarter Results

lower gross billings, due to the yen’s appreciation,

During the ﬁrst three months of 2009, the ADK Groupbut higher operating income. This was attributable

reported gross billings of ¥91,267 million (a 12.1% year-

to the growth of subsidiaries in the United States

on-year decline), gross proﬁt of ¥11,208 million (anand Southeast Asia, as well as reduced expenses

11.5% year-on-year decline) and operating income of ¥21

by European and Taiwanese subsidiaries, which

million (a 98.8% year-on-year decline). Equity in loss

implemented restructuring campaigns.

of afﬁliated companies—net was ¥10 million, whereas
it was a ¥74 million loss in the ﬁrst three months in
2008. This was mainly because net income at Digital
Advertising Consortium Inc. was smaller, and another

Other Business Segment

afﬁliate of information processing services reported a
net loss due to seasonality. Income before income tax

ADK has two consolidated subsidiaries in theand minority interests decreased 91.4% to ¥130 million,

publications industry. The smaller subsidiary,and net income totaled ¥99 million, an 88.3% year-on-

specializing in the publication of periodicals to selectyear decline.

membership clubs, continued struggling to obtain newcontracts to absorb its ﬁxed costs. The publicationsindustry has been experiencing sluggish growth under
the inﬂuence of growing consumer preference for
the Internet and mobile media. Accordingly, the otherFiscal 2009 Forecast

subsidiary, which handles general publications, posted a

It is anticipated that the recession in Japan will continue

decline in sales and reported an operating loss. This was

although we may see some short-term recoveries, anddespite its efforts to cut redundancies and discontinue

investments in communications by corporations will

less-proﬁtable titles, as well as its campaign to squeeze

continue to be limited for some time. Considering thisprinting costs. As a result, the Group’s non-advertising

difﬁcult economic environment and the results reported

businesses generated gross billings of ¥8,222 million, aherein for the ﬁrst three months of ﬁscal 2009, we

4.5% year-on-year decline, and posted an operating loss

are working on a possible revision of the forecast, butof ¥44 million compared with a ¥4 million operating

under increased uncertainty, the Group has not yet

loss in ﬁscal 2007.

changed its forecast.
Fiscal 2009 Forecast (announced on February 13, 2009)
Millions of Yen

Overseas Sales
Gross billings
In ﬁscal 2008, the ADK Group obtained 6.2% of its

Operating income

gross billings from outside Japan. All overseas sales are

Net income

2009

2008

¥393,200¥399,452

-1.6%

3,699

-16.2

2,125

17.6%

3,100
¥

2,500

¥

Changegenerated from the advertising business.

37

ADK Annual Report 2008

Forward-Looking Statements and Risk Factors
This report may contain forward-looking statements basedon ADK management’s view and assumptions of future

Risks Arising from Industry Customs

developments as of the date of such statements. The foregoingWith Advertising Clients:

statements herein are inherently subject to risks, including, but

In Japan, traditionally advertisers do not strictly require an

not limited to, those shown below (under Tokyo Stock Exchange

exclusive relationship with their agencies, which may haveguidance) and uncertainties that could lead to material

business with competitors. However, there is no assurance

differences between such statements and actual outcomes.

that this practice will continue in the future. In the event that

Therefore, ADK does not warrant any certainty and accuracy

ADK fails to adapt to such changes in the advertising market,

thereto. ADK also expressly disclaims any obligation to update

its performance and ﬁnancial conditions could be adversely

or revise its forward-looking statements.

affected.
Advertising companies in Japan do not always havedocumented contracts with media and clients so as to maximize

Domestic Economy

their ﬂexibility in order to adapt to sudden changes. However,During FY2008, the Group generated 93.8% of its gross billings

more media and more clients. When this is the rule, not thefrom the Japanese domestic markets. Japanese national

exception, the company believes accountability by both parties

advertising spending has been strongly correlated withwill minimize disputes. Until that time, however, there remains

the nominal GDP. In the event that the domestic economy

the possibility of disputes with media and clients.

deteriorates seriously, the ADK Group’s performance andﬁnancial conditions could be negatively affected.

ADK works to ensure that it has written contracts with

An advertising agency buys media time or space andmaterials on behalf of its clients on its own account. Sometimes
a purchase is made through another agency. Therefore, even

Changes in the Advertising Market

if a client and/or such other agency defaults, the advertising

The ADK Group intends to continue to sell traditional mass

media owner and or a subcontracting production company.

company is still liable for the media and/or materials toward a

media advertising space and time to its well-diversiﬁed
clientele as well as carry out sales promotions and a wide range

With Media Owners:of peripheral services under its 360-degree communications

Occasionally, ADK purchases media inventories, particularly

approach. However, failure to respond appropriately toanimation programs, at ﬁxed prices based on orders fromany market changes—including, but not limited to, changes

client advertisers. Although we strive to improve the quality

in advertisers’ budgets (by name and/or industry), media

of content, and increase the demand of such programs byinventory costs and advertising methods—could signiﬁcantly

keeping a close relationship with the media, in the case of weakaffect performance and ﬁnancial conditions.

sales, excess inventories could have an adverse effect on our
performance and ﬁnancial conditions.

Response to the Development of New MediaWith Subcontractors:

Among the advertising media, digital media are developing

In Japanese advertising markets, an advertising agency is

rapidly through broadband and mobile products, supported

usually required to absorb the credit and functionality risks ofby more developed technologies like video, enhanced searchmany small and specialty subcontractors without shifting themengines, information and view sharing services, weblogs, etc.

to the advertisers. Besides, sometimes an agency needs to help

These changes could cause consumers to spend more time

the ﬁnancing of such subcontractors with advance payments.

on digital media and behave differently when purchasing

In an international business, a partial advance payment isgoods. The ADK Group believes traditional and non-traditionalcommonly required. When a subcontractor cannot fulﬁll an

media complement each other and that it is essential for an

order from an advertiser or maintain its business as a going-

advertising agency to offer 360-degree cross-communications

concern, an agency is likely to suffer a loss.

programs. However, if ADK fails to adapt to changes in theadvertising media, its performance and ﬁnancial conditions
could be adversely affected.

Competitive Risk
Competition among Japan’s major advertising companies isintensifying. The several top tier agencies dominate with a38

Forward-Looking Statements and Risk Factors

nearly 50% market share. The ADK Group, the third largest
group with a 5%–6% market share, competes in this market.

Staff

Under the recessional economy, our advertising clients selectAdvertising is a people business, and talent is a critical asset

effective ad campaigns and may tend to buy communicationsin the advertising industry. In the event that ADK is unable tosolutions from a small number of preferred agencies to better

secure and train its talented staff adequately, there could be ameasure communications efﬁciencies and enjoy better prices.

negative impact on performance and ﬁnancial conditions.

In addition, the entry of foreign mega-agency groups into theAlso, most staff costs are ﬁxed costs and accounted forJapanese market, many new and rapidly growing entrants in

67.5% of total SG&A expenses in ﬁscal 2008. Therefore, staff

the Internet advertising market and the dominance of Google

costs have a large inﬂuence on the cost structure of the ADK

in search engine marketing has accelerated the competition.

Group.

In the event that ADK is unable to respond appropriately toclient needs and changes in the advertising industry, and loses
its competitiveness as a result, there is signiﬁcant risk that its

Overseas Operations

market share could decline and proﬁtability could deteriorate.

In overseas markets, because of the differences in culture

This would have a serious impact on its performance andand society, a variety of problems may arise. In addition, bothﬁnancial condition.

country risk and currency risk are inherent in conducting
international business. In the event that the ADK Group is

Relationships with Advertisers

unable to expand its overseas operations as planned, the

The ADK Group has a diversiﬁed portfolio of ﬁrst-tier clients.

signiﬁcantly affected.

Group’s performance and ﬁnancial condition could be

The parent company’s largest 10 and 20 clients accounted
for 21.8% and 33.0% of total unconsolidated gross billings forﬁscal 2008, respectively, and compared to competitors, sector

Content Businessconcentration risk is limited. Although we strive to maintain

ADK continues to develop new content under existing andand develop good relationships with our clients, there is no

new business models. However, there is no guarantee of

assurance that we will be able to continue to do so.

the continued success of this content or of derivative andor resale income from it. Accordingly, in the case that theRelationships with MediaGroup is not able to generate income as expected, the GroupADK generates 68.6% of its unconsolidated gross billings by

ﬁnancial conditions.

could experience a signiﬁcant impact on its performance andhandling the four major mass media as well as the rapidly
growing Internet and digital advertising sectors and OOH
media. ADK strived to secure advertising time and/or space ofRelationship with WPP plc

these traditional and new media during ﬁscal 2008. However, in

ADK has maintained strategic operating and equity ties withthe event of a decrease in advertising volume and/or changes

WPP plc since August 1998, holding a 2.49% equity stake inin business terms and conditions and advertising methods, and/

WPP (as of December 31, 2008). WPP holds 24.04% of theor the emergence of new advertising formats, and should thevoting rights in ADK. At the same time, both companies have

ADK Group not respond to these changes appropriately, there

non-executive directors on each other’s boards. By way ofis a signiﬁcant possibility that its performance and ﬁnancial

operating alliances with WPP Group operating companies,

conditions could be adversely affected.

including JWT, ADK made a number of creative and promotional
tie-ups and will continue to develop operations worldwide.

Relationships with Subcontractors

Because ADK does not own a majority of WPP’s voting
rights, and our inﬂuence on WPP Group operations is limited, in

Although ADK carries out the planning for advertising andthe event that the ADK Group is unable to realize the beneﬁts

sales promotion campaigns, the execution of these activities

from this relationship or if the relationship should negatively

is mostly outsourced to qualiﬁed subcontractors. In the casechange in any way, there could be an impact on the ADK Group’sof a change in trading relationships with these subcontracted

performance and ﬁnancial conditions in the future.

companies and in the event that ADK is unable to respond
appropriately, this could have a negative impact on groupperformance and ﬁnancial conditions.

39

ADK Annual Report 2008

In addition, although the yen translated market value ofthe equity stake in WPP was ¥16,605 million as of the end of
December 2008, when the WPP stock price was £4.025 per

Forward-Looking Statements and Risk Factors

beneﬁciaries, and so on, the Group would need to recognize
larger net periodic beneﬁt costs.
The fund’s total pension assets and liabilities as of March 31,

share, compared to the book value of ¥22,262 million (under2008, were ¥70,570 million and ¥86,836 million, respectively,

the lower-of-cost-or-market method as of the end of 1998,

and therefore the difference was negative ¥16,266 million. The

when the stock price was £3.6517), in the event of a major

discount rates for the liabilities were mainly 5.5%.

deterioration in the Group’s stock price on a sterling basis,

The ADK Group’s cash contribution share by both employers

there is a possibility that ADK would have to account forand employees made during the year through March 2008

valuation losses on this holding.

were 9.01% and 5.54%, respectively, making the total 14.55%.
Applying simply the shares to the aforementioned total fundMarketable Securities andInvestment Securities

assets, the Group’s pro-rated share of assets as of March 31,

The ADK Group’s holdings of marketable and investment

million and ¥3,907 million, respectively. Likewise, the Group’s

securities (including the aforementioned stake in WPP plc andpro-rated share of pension liabilities was ¥12,632 million in

the equity method value of Digital Advertising Consortium,

total. Out of that amount, the employers’ portion and theInc. “DAC”) totaled ¥41,925 million, representing 21.9% of ouremployees’ portion were ¥7,824 million and ¥4,807 million,¥191,782 million in total assets as of December 31, 2008. Of

respectively.

2008, was ¥10,265 million in total. Out of that amount, theemployers’ portion and the employees’ portion were ¥6,358

this amount, ¥29,833 million is publicly traded equity securities
mostly for cross-shareholdings in advertising clients andother trading partners (excluding our 27.0% stake in DAC, theContingent Litigation Risks

unconsolidated result of which is accounted for by the equity

As of the date of the statements, the ADK Group had not been

method at ¥2,024 million). Under the global ﬁnancial crisis,

involved in or exposed to a lawsuit or dispute that could place

the ADK Group incurs the balance of an unrealized loss on

signiﬁcant negative inﬂuence on the group’s performance andavailable-for-sale securities of ¥2,394 million after deducting

ﬁnancial conditions. However, there is no guarantee that thedeferred tax assets on such loss. In the event of a major decline

Group will never be involved in or exposed to such a lawsuitin the market prices in each of these holdings, we would be

or dispute.

forced to account for valuation losses.

Retirement Beneﬁts and Pension Plans

Legal Risks
The ADK Group’s advertising clients are affected by a number

At the end of 2004, ADK reformed its employee retirementof mandatory and voluntary regulations, depending on the

beneﬁts and pension plans, and adopted a deﬁned contribution

types of businesses in which they engage. If these laws andpension plan and a cash balance plan to reduce the volatility

regulations are tightened or new ones are enacted, our clients’of net periodic beneﬁt costs, an element of staff costs, throughadvertising activities could shrink or become curtailed. Sucha smaller Projected Beneﬁt Obligation and less risky pension

changes could have a negative impact on our performance andasset investment strategy.

ﬁnancial conditions.

In the event of deterioration in pension asset management
performance, and a signiﬁcant change in actuarial assumptions,
the ADK Group could face a negative impact on its performanceand ﬁnancial condition.
ADK and some of its domestic subsidiaries are members ofRegulatory Changes
In Japan, there are a number of laws that bind advertising
companies, including ADK. These include laws to prevent

the Japan Advertising Industry Welfare Pension Fund. Becausedelays in payment to subcontractors and to protect personal

the ADK Group cannot technically and reasonably deﬁne how

information, as well as regulations applicable to advertisingmuch pension assets and liabilities the Group is accountablecompanies. If there is a strengthening of existing laws orfor, the Group recognizes its annual cash contribution to theregulations affecting the activities of advertisers or the format

fund as its periodical beneﬁt costs applicable for the fund.

or content of advertisements, the ﬁnancial results of the ADK

In the case that the fund requires the Group to make a larger

Group and other advertising companies could be adversely

contribution due to changes in the discount rate, pension

affected. In the case that there is the introduction of newplan asset performance, number of member companies andlaws or regulations, or the reinterpretation of existing laws
or regulations, the result could also affect the ADK Group’s
performance.

40

Financial Section
Consolidated Balance Sheets

42

Consolidated Statements of Income

44

Consolidated Statements of Changes in Net Assets

45

Consolidated Statements of Cash Flows48

Notes to Consolidated Financial Statements

49

Independent Auditors' Report

67

41

ADK Annual Report 2008

Consolidated Balance Sheets
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2008 and 2007
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

ASSETS

2008

20 07

2008

¥ 14,881¥ 22,863$ 163,473

3,419

3,676

37,559101,823

108,045

1,118,565

(723)

(624)

(7,942)

8,624

9,037

94,738

477

711

5,240

CURRENT ASSETS:
Cash and time deposits
Marketable securities (Note 3)
Notes and accounts receivable:—tradeAllowance for doubtful receivables
Inventories
Deferred tax assets (Note 7)
Other current assets

2,971

3,838

32,638131,472

147,546

1,444,271

Land

1,284

1,293

14,105

Buildings and leasehold improvements

4,028

4,142

44,249

Other

2,540

2,107

27,902

7,852

7,542

86,256(3,775)(3,676)(41,469)

4,077

3,866

44,78734,926

77,246383,675

Total current assets
PROPERTY AND EQUIPMENT:

Total
Accumulated depreciation
Net property and equipment
INVESTMENTS AND OTHER ASSETS:
Investment securities (Note 3)
Investments in unconsolidated
subsidiaries and affiliated companies

7,314

6,812

80,347

Deferred tax assets (Note 7)

3,574

449

39,262Other assets

10,41910,178114,457

56,233

94,685

617,741¥191,782¥246,097$2,106,799

Total investments and other assets
TOTAL

See notes to consolidated financial statements.

42

Financial Section

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

LIABILITIES AND NET ASSETS

2008

20 07

¥

¥

2008

CURRENT LIABILITIES:
Short-term debt (Note 4)
Current portion of long-term debt (Note 4)
Notes and accounts payable—trade
Income taxes payable (Note 7)
Accrued bonuses to employees
Allowance for sales returns
Deferred tax liabilities (Note 7)
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Note 4)
Accrued retirement benefits (Note 5)
Allowance for retirement benefits to directors
and corporate auditors*
Provision for loss on guarantees
Deferred tax liabilities (Note 7)
Other long-term liabilities
Total long-term liabilities

551
151
78,241
52
291
599
6
7,663
87,554

1,084
48
87,417
2,345
679
537
—
7,787
99,897

$

6,053
1,659
859,508
571
3,196
6,580
66
84,181
961,814

341
850

1,246

3,746
9,338

1,145
37
13
225
2,611

694
—
12,132
222
14,354

12,578
406
143
2,472
28,68337,581
20,02452,158(6,088)103,675

37,581
20,02451,901(203)
109,303412,842219,971572,976(66,879)
1,138,910(2,394)(22)(671)(3,087)
1,029
101,617

20,304
1
1,087
21,392
1,151
131,846(26,299)(241)(7,371)(33,911)
11,303
1,116,302¥191,782¥246,097$2,106,799

60

CONTINGENT LIABILITIES (Note 10)
NET ASSETS (Note 6):
Shareholders’ equity
Common stock
Authorized: 206,000,000 shares in 2008 and 2007;
Issued: 45,155,400 shares in 2008 and 2007,
respectively
Capital surplus
Retained earnings
Treasury stock—at cost
Total shareholders’ equity—net
Valuation and translation adjustments
Unrealized gain (loss) on available-for-sale securities
Deffered gain (loss) on delivatives under hedge accounting
Foreign currency translation adjustments
Total valuation and translation adjustments
Minority interests
Total net assets
TOTAL*No allowance for retirement benefits to corporate auditors was standing as of December 31, 2008,
due to the abolition of the retirement bonus system to them.
See notes to consolidated financial statements.

43

ADK Annual Report 2008

Consolidated Statements of Income
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2008 and 2007

Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2008

20 07

GROSS BILLINGS (Note 12)¥399,452¥435,011$4,388,135

COST OF SALES (Note 12)

350,309383,257

3,848,280

49,14351,754

539,855

45,444

44,620499,220

3,699

7,134

40,635Interest and dividend income—net

1,732

1,902

19,026

Gain on sales of securities

1,427

2,761

15,676Gross profit

2008

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES (Notes 8 and 12)
Operating income
OTHER INCOME (EXPENSES):

Loss on sales of securities
Loss on valuation of securities
Amortization of negative goodwill

(27)

(0)

(296)

(1,965)(1,644)(21,586)—31—

Equity in earnings (losses) of affiliated companies—net

648

(258)

7,118

Additional retirement benefits paid to employees

(321)

(47)

(3,526)(459)—(5,042)

(37)

—

(406)

(1,111)(72)(12,205)

189

315

2,076

76

2,988

835

3,775

10,122

41,470Current

1,488

4,514

16,346

Deferred

154

180

1,692

8

78

88

Provision for retirement benefits paid to directors
and corporate auditors
Provision for loss on guarantees
Exchange loss
Other—net
Other income—net
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTSINCOME TAXES (Note 7):

MINORITY INTERESTS IN NET INCOME
NET INCOME

See notes to consolidated financial statements.

44

¥

2,125

¥

5,350

$

23,344

Financial Section

Consolidated Statements of Changes in Net Assets (1)ASATSU-DK INC. and Consolidated Subsidiaries
Year Ended December 31, 2008
Millions of Yen

Year Ended December 31, 2008

Balance as of December 31, 2007

Shareholders’ equity
Total
Treasuryshareholders’
stock—at costequityCommonstock

CapitalsurplusRetainedearnings¥37,581¥20,024¥51,901¥(203)¥109,303

Change during the consolidated fiscal year
Dividend payments(1,883)(1,883)

Net income

2,125

2,125

Increase due to newly consolidated

19

subsidiaries
Acquisitions of treasury stock
Disposals and cancellation of treasury stock

19(5,888)(5,888)3

3

Increase due to change in accounting
standards of foreign subsidiaries
Other decrease of retained earnings (Note)

1

1

(5)

(5)

(Net) changes of items other thanshareholders’ equity

—

—

257

(5,885)(5,628)¥37,581¥20,024¥52,158¥(6,088)¥103,675

Minority
interests

Total net
assetsTotal change during the consolidated fiscal year
Balance as of December 31, 2008

Valuation and translation adjustments
Unrealized
gain onavailablefor-salesecurities

Balance as of December 31, 2007

¥20,304

DeferredForeign
Total valuation
gain oncurrency
andderivatives
translation
under hedge translationaccounting adjustments adjustments¥ 1¥1,087¥21,392¥1,151 ¥131,846

Change during the consolidated fiscal year
Dividend payments(1,883)

Net income

2,125Increase due to newly consolidated

19

subsidiaries(5,888)Acquisitions of treasury stock3

Disposals and cancellation of treasury stock
Increase due to change in accounting

1

standards of foreign subsidiaries(5)

Other decrease of retained earnings (Note)(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2008

(22,698)(23)(22,698)(23)¥ (2,394)¥(22)(1,758)(24,479)(1,758)(24,479)¥ (671) ¥ (3,087)(122)(24,601)(122)(30,229)¥1,029 ¥101,617(Note) Other decrease of retained earnings is appropriation of retained earnings at a Chinese subsidiary to provide reserves for
employees incentive and welfare funds under a Chinese accounting standard.

45

ADK Annual Report 2008

Consolidated Statements of Changes in Net Assets (2)ASATSU-DK INC. and Consolidated Subsidiaries
Year Ended December 31, 2007
Millions of Yen

Year Ended December 31, 2007

Shareholders’ equity

Balance as of December 31, 2006

Commonstock

CapitalsurplusRetainedearnings¥37,581¥ 40,607¥47,671

Total
Treasuryshareholders’
stock—at costequity¥(12,973)¥112,886

Change during the consolidated fiscal year
Dividend payments(1,258)(1,258)Net income

5,350

5,350

138

138

Increase due to newly consolidated
subsidiaries
Acquisitions of treasury stock
Disposals and cancellation of treasury stock(20,583)(7,813)(7,813)

20,5830(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2007—

(20,583)

4,230¥37,581¥ 20,024¥51,901¥

12,770(3,583)(203)¥109,303

Minority
interests

Total net
assetsValuation and translation adjustments
Unrealized
gain onavailablefor-salesecurities

Balance as of December 31, 2006

¥26,676

DeferredForeign
Total valuation
gain oncurrency
andderivatives
translation
under hedge translationaccounting adjustments adjustments

¥1

¥ 775

¥27,452¥1,049 ¥141,387

Change during the consolidated fiscal year
Dividend payments(1,258)Net income

5,350

Increase due to newly consolidated
subsidiaries

138

Acquisitions of treasury stock(7,813)

Disposals and cancellation of treasury stock0(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2007

46

(6,372)0

312(6,060)102(5,958)(6,372)0

312(6,060)102(9,541)¥20,304¥1¥1,087¥21,392¥1,151 ¥131,846

Financial Section

Consolidated Statements of Changes in Net Assets (3)ASATSU-DK INC. and Consolidated Subsidiaries
Year Ended December 31, 2008
Thousands of U.S. Dollars (Note 1)

Year Ended December 31, 2008

Balance as of December 31, 2007

Shareholders’ equity
Total
Treasuryshareholders’
stock—at costequityCommonstock

CapitalsurplusRetainedearnings$412,842$219,971$570,153$ (2,230)$1,200,736

Change during the consolidated fiscal year
Dividend payments(20,685)(20,685)

Net income

23,344

23,344

Increase due to newly consolidated
subsidiaries

208

208

Acquisitions of treasury stock(64,681)(64,681)32

32

Disposals and cancellation of treasury stock
Increase due to change in accounting
standards of foreign subsidiaries
Other decrease of retained earnings (Note)

10

10

(54)

(54)

(Net) changes of items other thanshareholders’ equity
Total change during the consolidated fiscal year
Balance as of December 31, 2008

—

—

2,823

(64,649)(61,826)$412,842$219,971$572,976$ (66,879)$1,138,910

Valuation and translation adjustments
Unrealized
gain onavailablefor-salesecurities
Balance as of December 31, 2007

$223,047

DeferredForeign
Total valuation Minority
gain oncurrency
andinterests
derivatives
translation
under hedge translationaccounting adjustments adjustments$ 11$11,941$234,999

Total net
assets$12,643 $1,448,378

Change during the consolidated fiscal year
Dividend payments(20,685)

Net income

23,344

Increase due to newly consolidated
208

subsidiaries
Acquisitions of treasury stock(64,681)

Disposals and cancellation of treasury stock

32

Increase due to change in accounting
standards of foreign subsidiaries

10

Other decrease of retained earnings (Note)(54)(Net) changes of items other than(249,346)(252)(19,312)(268,910)(1,340)(270,250)

Total change during the consolidated fiscal year

(249,346)(252)(19,312)(268,910)(1,340)(332,076)

Balance as of December 31, 2008

$ (26,299)$(241)$ (7,371) $ (33,911)

shareholders’ equity$11,303 $1,116,302(Note) Other decrease of retained earnings is appropriation of retained earnings at a Chinese subsidiary to provide reserves for
employees incentive and welfare funds under a Chinese accounting standard.
Yen

2008

U.S. Dollars (Note 1)

20 07

2008

PER SHARE OF COMMON STOCK:Net income
48.14¥ 116.40

Diluted

Basic

48.12

—

0.53

Net assets

2,334.48

2,898.49

25.65

20.00

42.00

0.22

Cash dividend applicable to the year¥

$ 0.53

See notes to consolidated financial statements.

47

ADK Annual Report 2008

Consolidated Statements of Cash FlowsASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2008 and 2007
Thousands of
U.S. Dollars (Note 1)

Millions of Yen

2008

20 07

2008

OPERATING ACTIVITIES:
Income before income taxes and minority interests¥ 3,774¥10,122$ 41,458(44,655)

Adjustments for:(4,065)(4,664)

Depreciation and amortization

Income taxes—paid

803

1,170

8,821

Equity in losses (earnings) of affiliated companies

(648)

258

(7,118)Gain on sales of securities(1,427)(2,761)(15,676)

Loss on sales of securities

27

0

296

1,965

1,644

21,586

5,421(6,156)59,551

(6)

(926)

(65)

(8,385)

1,435(92,112)

Loss on valuation of securities
Changes in assets and liabilities:(Increase) Decrease in notes and accounts receivable
Increase in inventories
Increase (Decrease) in notes and accounts payable
Others—net

(640)

61

(7,030)Total adjustments(6,955)(9,939)(76,402)

Net cash provided by operating activities(3,181)

183(34,944)INVESTING ACTIVITIES:
1,415

(893)

15,544

Proceeds from sales of securities

Increase in time deposits—net

13,344

6,933

146,589

Purchases of securities(5,561)(1,476)(61,090)

33

25

362

(745)

(302)

(8,184)(1,319)(304)(14,489)

(82)

505

(901)

7,085

4,488

77,831

Proceeds from sales of property and equipment
Purchases of property and equipment
Purchases of intangible assets
Other investing activities
Net cash used in investing activities
FINANCING ACTIVITIES:
Increase (Decrease) in short-term debt—net

(444)

686

(4,877)

Increase of long-term debt

455

—

4,998

Repayment of long-term debt

(70)

(49)

(769)

—

(500)

—

Purchases of treasury stock—net(5,885)(7,812)(64,649)

Dividends paid

(1,883)(1,258)(20,685)

(26)

(35)

(286)

(7,853)(8,968)(86,268)(1,289)252(14,160)¥ (5,238)¥ (4,045)$ (57,541)

17,994

21,932

197,671

51

107

560

¥12,807¥17,994$140,690

Redemption of bonds

Other financing activities
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON
CASH AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARIES, BEGINNING OF THE YEAR
CASH AND CASH EQUIVALENTS, END OF THE YEAR
See notes to consolidated financial statements.

48

Financial Section

Notes to Consolidated Financial Statements
ASATSU-DK INC. and Consolidated Subsidiaries
Years Ended December 31, 2008 and 2007

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated ﬁnancial statements
have been prepared from the accounts maintained by
ASATSU-DK INC. (the "Company") and its consolidated
subsidiaries in accordance with the provisions set forthin the Financial Instrument and Exchange Law and its
related accounting regulations, and in conformity withaccounting principles and practices generally acceptedin Japan, which are different in certain respects as
to application and disclosure requirements fromInternational Financial Reporting Standards.
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.

The consolidated ﬁnancial statements are statedin Japanese yen, the currency of the country in which
the Company is incorporated and mainly operates. The
translation of Japanese yen amounts into U.S. dollar
amounts is included solely for the convenience ofreaders outside Japan and has been made at the rate of¥91.03 to U.S.$1.00, the approximate rate of exchange
on December 31, 2008. Such translation should not be
construed as a representation that the Japanese yenamounts could be converted into U.S. dollars at that or
any other rate.
Certain reclassiﬁcations have been made in
the 2007 ﬁnancial statements to conform to thepresentation for 2008.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated ﬁnancial statements
include the accounts of the Company and its signiﬁcanttwenty-three (23) (twenty-three (23) in 2007) majorityowned subsidiaries (together, the “Group”).
Under the control or inﬂuence concept, thosecompanies in which the Company, directly or indirectly,
is able to exercise control over operations are fully
consolidated, and those companies over which theGroup has the ability to exercise signiﬁcant inﬂuence
are accounted for by the equity method.
Twenty-two (22) subsidiaries use a ﬁscal year
ended at December 31, so does the Company. One
subsidiary uses a ﬁscal year ended at September 30.
The consolidated ﬁnancial statements include theﬁnancial statements of this subsidiary for its respectiveﬁscal years after making appropriate adjustments
for signiﬁcant transactions during the periods fromits respective year-end dates to the date of theconsolidated ﬁnancial statements.
Investments in three (3) afﬁliated companies, 20%
to 50% of which interests are owned by the Company,
are accounted for by the equity method. (Investmentsin the three (3) afﬁliated companies were accounted
for by the equity method in 2007.) Investments in

the remaining twenty-ﬁve (25) (twenty-seven (27) in2007) unconsolidated subsidiaries and eighteen (18)(nineteen (19) in 2007) afﬁliated companies are statedat cost. If these companies are fully consolidated, orthe equity method of accounting had been applied tothe investments in these companies, the effect on theaccompanying consolidated ﬁnancial statements would
not be material.
Goodwill is charged or credited to income, in theyear incurred.
All signiﬁcant inter-company balances andtransactions have been eliminated in consolidation. All
material unrealized proﬁts included in assets resulting
from intra-group transactions are eliminated.
b. Cash and Cash Equivalents—Cash and cash
equivalents consist of cash, demand deposits with banks
and those which are short-term investments that arereadily convertible into cash and that are not exposed
to signiﬁcant risk of changes in value.
Cash equivalents include time deposits, certiﬁcatesof deposit and money management funds investing inbonds for short terms, all of which mature or becomedue within three months of the date of acquisition.

49

ADK Annual Report 2008

The balances of cash and cash equivalents as of December 31, 2008 and 2007 are reconciled to the balance
sheets as follows:

Thousands of
U.S. Dollars

Millions of Yen

2008

20 07

2008

Balance sheet:
Cash and time deposits¥14,881¥22,863$163,473

Securities

3,419

3,676

37,559Total

18,30026,539201,032

3,960

5,326

43,502Less:
Time deposits over three months
Securities not applicable to cash equivalents(Securities other than Money Management Funds, etc.)
Cash and cash equivalents

c. Inventories—Inventories consist principally of billable
production orders in process, which are stated at cost
determined by the speciﬁc identiﬁcation method.
Billable production orders in process are primarily costs
incurred on behalf of clients when providing advertising
services such as marketing and branding consultation,
designing and producing of sales promotion programs,
and event marketing to clients.
d. Marketable and Investment Securities—All applicablesecurities are classiﬁed and accounted for, depending on
management’s intent, as follows:i) trading securities, which are held for the
purpose of earning capital gains in the near term, arereported at fair value, and the related unrealized gains
and losses are reﬂected to earnings of the period ofsuch gain or loss, ii) held-to-maturity debt securities,
which are expected to be held to maturity with thepositive intent and ability to hold to maturity arereported at cost after amortization or accumulationof any difference between cost and face value and iii)
available-for-sale securities, which are not classiﬁed aseither of the aforementioned securities, are reported atfair value, and which unrealized gains and losses, net of
applicable taxes, are reported to Unrealized gain (loss)
on available-for-sale securities, a component of net
assets. As of the end of 2007 and 2008, the Company
and its consolidated subsidiaries have no balance ofheld-to-maturity debt securities.
If the market values of held-to-maturity debt
securities, equity securities issued by unconsolidated
subsidiaries and afﬁliated companies, and availablefor-sale securities, decline signiﬁcantly, such securities
are stated at fair market value, and the difference
50

1,533

3,219

16,840¥12,807¥17,994$140,690

between the fair market value and the carrying amountis recognized as a loss in the period of the decline. If
the fair market value of equity securities issued byunconsolidated subsidiaries and afﬁliated companies
which have not been accounted for by the equity
method is not readily available, such securities should
be written down to net asset value with a corresponding
charge in the statement of income in the event net asset
value declines signiﬁcantly. In these cases, such fairmarket value or the net asset value will be the carrying
amount of the securities at the beginning of the nextyear.
e. Property and Equipment—Property and equipment
are carried at cost. Depreciation for the property andequipment other than the buildings acquired after April
1, 1998, is computed mainly by the declining balancemethod at rates based on the estimated useful lives of
the assets. Depreciation of buildings acquired after April
1, 1998, is computed by the straight line method overtheir estimated useful lives. The estimated useful livesof major assets are as follows:
Buildings and leasehold improvements 10–50 years
Under the amendment of Japanese Corporation Tax
Law, effective April 2007, the Company and its domestic
subsidiaries are allowed to depreciate the entire cost of
their property, plant and equipment leaving no salvage
value. The property, plant and equipment acquired byMarch 31, 2007 are and will be depreciated to the value
allowed to depreciate as originally scheduled before theamendment of the law, and then the remaining amount(i.e., the balance not yet depreciated) is and will beFinancial Section

depreciated to zero value from the following year in ﬁve
years. The effects of the changes and application of theamended tax law are immaterial.
f. Provision for Loss on Guarantees—The Group setsaside a reserve of losses on guarantees for liabilities
owed by non-consolidated subsidiaries, afﬁliatedcompanies or business associates. The amount of suchprovision reﬂects estimated potential losses based onsuch factors as the ﬁnancial condition of parties whose
liabilities are guaranteed.
g. Retirement Beneﬁts and Pension Plans—The Groupaccounted for the liability for retirement beneﬁts basedon the projected beneﬁt obligations and plan assets atthe balance sheet date, except for the liability in regard
with Japan Advertising Industry Pension Fund, as noted
later.
The Company’s directors are entitled, in mostcircumstances, to lump-sum severance payments
based on current rates of pay, length of services andother certain factors. The Company accrues 100%of obligations based on its rule required under theassumption that all directors retired at the balance sheet
date.
The Company decided to abolish the system for
granting retirement beneﬁts for corporate auditors at
the 52nd Ordinary General Meeting of Shareholders
held on March 28, 2007 and to make cutoff payments
for retirement beneﬁts, which would be paid at the timeof retirement of the respective corporate auditors. This
has led to the reclassiﬁcation of the balance sheet asof the end of 2007, where the allowance for retirement
beneﬁts to corporate auditors was transferred to otherlong-term liabilities.
During the ﬁscal 2008, some of the domestic
consolidated subsidiaries stipulated their internal rules
for retirement beneﬁts to their board members andcorporate auditors. Accordingly, these subsidiaries andthe Group recognized allowance for retirement beneﬁts
to directors and corporate auditors incurred by the endof 2008.
The Company and some of its domestic
subsidiaries are the members of Japan Advertising
Industry Pension Fund. Because the Group cannot
technically or reasonably deﬁne how much pension
assets and liabilities the Group is accountable for, theGroup recognizes its annual cash contribution to thefund as its periodical beneﬁt costs applicable for thefund but not as pension assets and liabilities.

h. Sales Recognition—Income derived from media
advertising is recognized upon publication or
broadcasting. Product sales are recognized when
the products are received by clients. One domestic
consolidated subsidiary provides allowances, based
upon the Japanese tax code, for returned publication
merchandise and losses derived from unsold publication
merchandise.
i. Leases—Leases are accounted for as operating leases
in the Company and domestic consolidated subsidiaries.
Under Japanese accounting standards for leases,
ﬁnance leases, where ownership of the leased property
is deemed to be transferred to the lessee, are to becapitalized, while other ﬁnance leases are permitted
to be accounted for as operating lease transactions if
certain “as-if-capitalized” information is disclosed in thenotes to the lessee’s consolidated ﬁnancial statements.
In major overseas consolidated subsidiaries, leases areaccounted for as ﬁnance leases and leased propertiesare capitalized.
j. Software and R&D Costs—Research and development
costs are charged to income when incurred. Capitalized
software for internal use amounting to ¥1,848 million($20,302 thousand) in 2008 and ¥970 million in 2007,
respectively, included in “Other assets” of investments
and other assets, was amortized by the straight line
method based on the estimated useful lives (ﬁve years).
k. Income Taxes—The provision for income taxes iscomputed based on the pretax income or loss reported
in the consolidated statements of income. Deferredincome taxes are recorded based on the asset andliability method to reﬂect the impact of temporary
differences between assets and liabilities recognizedfor ﬁnancial reporting purposes and such amounts
recognized for tax purposes by applying statutory tax
rate to the temporary differences. With respect to thedeferred tax assets, the companies believe it is more
likely than not that such tax beneﬁts will be realized
through the reduction of future taxable income.
l. Appropriations of Retained Earnings—Appropriationsof retained earnings at each year end are reﬂected in
the consolidated ﬁnancial statements for the following
year.
m. Foreign Currency Transactions—Short-term and longterm monetary receivables and payables denominated51

ADK Annual Report 2008

in foreign currencies are translated into Japanese yenat the exchange rates at the balance sheet dates. The
foreign exchange gains and losses from translation arerecognized in the consolidated statements of incomein the cases where they are not hedged by foreignexchange derivatives or a hedging transaction does
not qualify for speciﬁc hedge accounting.

transactions are recognized in the consolidated
statements of income, unless such derivatives qualify
for speciﬁc hedge accounting.
Short-term receivables and payables denominatedin foreign currencies for which foreign exchange
forward contracts are used to hedge the foreign
currency ﬂuctuations are translated at the contracted
rate if the forward contracts qualify for speciﬁc hedge
accounting.

n. Foreign Currency Financial Statements—Both balance
sheet accounts and revenue and expense items ofthe consolidated overseas subsidiaries and afﬁliatedcompanies are translated into Japanese yen at thecurrent exchange rates as of the balance sheet dates
except for shareholders’ equity, which is translated athistorical exchange rates.
Differences arising from such translation ofshareholders’ equity are shown as “Foreign currencytranslation adjustments” in a separate component ofshareholders’ equity.

p. Per Share Information—The computation of basic net
income per share is based on net income attributable
to shareholders of common stock and the weighted
average number of shares outstanding during each year,
and diluted net income per share is computed basedon net income attributable to shareholders of common
stock after giving the effect to the net income of an
afﬁliated company which has the dilutive potential ofshares and the weighted average number of shares
outstanding during each year. The average number ofcommon shares used in the computation was 44,145,863
shares for the ﬁscal year ended December 31, 2008 and45,963,907 shares for the ﬁscal year ended December
31, 2007, respectively.
Cash dividends per common share presented in
the accompanying consolidated statements of income
are dividends applicable to net income of the respective
years including dividends paid after the end of the year.

o. Derivatives and Hedging Activities—The Group
uses derivative ﬁnancial instruments to manage its
exposures to ﬂuctuations in foreign exchange. Foreignexchange forward contracts are utilized by the Group to
reduce foreign currency exchange risks. The Group does
not enter into derivatives for trading or speculative
purposes.
Derivatives are recognized as either assets or
liabilities at fair value and gains or losses on derivative

3. MARKETABLE AND INVESTMENT SECURITIESThe carrying amount and aggregate fair value of the securities classiﬁed as available-for-sale as of December 31,
2008 and 2007 were as follows:
Millions of Yen

2008

Cost

Unrealized gains

Unrealized losses

Fair value

Available-for-sale:
Equity securities¥33,231¥4,358¥7,756¥29,833

Debt securities

5,363

4

499

4,868

Other

924

1

13

912

Total

¥39,518¥4,363¥8,268¥35,613Millions of Yen

2007

Cost

Unrealized gains

Unrealized losses

Fair value

Available-for-sale:

52

Equity securities¥34,636¥34,132¥ 561¥68,207

Debt securities

10,18910,732

146

689

Other

483

4

34

453

Total

¥45,851¥34,282¥1,284¥78,849

Financial Section

Thousands of U.S. Dollars

2008

Cost

Unrealized gains Unrealized losses

Fair value

Available-for-sale:
Equity securities$365,055$47,874$85,202$327,727

Debt securities

58,91544

5,482

53,477

Other

10,15011

143

10,018

Total$434,120$47,929$90,827$391,222

The carrying amount of the securities classiﬁed as available-for-sale securities whose fair values are not readily
determinable as of December 31, 2008 and 2007 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2008

Carrying amount

20 07

2008

Available-for-sale:Non-listed equity securities
Investment trust
Money management funds
Free ﬁnancial funds
Medium-term government bond funds
Other
Total

¥1,451
1,126
—
—
—
155
¥2,732

Total sales of available-for-sale securities soldin the years ended December 31, 2008 and 2007
amounted to ¥11,393 million ($125,157 thousand) and¥8,499 million and the related gains amounted to ¥1,464
million ($16,082 thousand) and ¥2,761 million, and therelated losses amounted to ¥79 million ($868 thousand)and ¥0 million, respectively.

¥1,639
—
83
4
68
279
¥2,073$15,940
12,369———1,703$30,012

The redemption schedule for available-for-salesecurities with maturities as of December 31, 2008
and 2007 is as follows. (Note: If a security with aderivative instrument is to be redeemed earlier thanthe contracted maximum maturity date under certain
conditions, regardless of such conditions, the maximum
maturity date is reﬂected in the schedule.)
Millions of Yen

2008
Debt securities
Other
Total

Due within one year

1 to 5 years

5 to 10 years

Over 10 years¥1,674¥1,568¥1,132

¥491

—

—

—

—

¥1,568¥1,132¥491¥1,674
Millions of Yen

2007
Debt securities
Other
Total

Due within one year

5 to 10 years

Over 10 years¥3,0991 to 5 years¥3,459¥1,021¥2,610

16

—

—

47

¥3,115¥3,459¥1,021¥2,657

Thousands of U.S. Dollars

2008
Debt securities
Other
Total

Due within one year

1 to 5 years

5 to 10 years

Over 10 years$18,390$17,225$12,435$5,394————$17,225$12,435$5,394$18,39053

ADK Annual Report 2008

4. SHORT-TERM AND LONG-TERM DEBT
The weighted average annual interest rates applicable to the short-term debt were 2.07% and 3.27% at December 31,
2008 and 2007, respectively.
Long-term debt as of December 31, 2008 and 2007 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2008
Loans due through 2013 (See note below.)

20 07

2008

¥ 492

¥108

Amount due within one year

(151)

(48)

$ 5,405(1,659)

Total

¥ 341

¥ 60

$ 3,746

Note: Weighted average interest rates or averages of interest rates applicable to loans outstanding at the end of each fiscal year
weighted by then amounts of loans, for the loans due beyond one year are 4.53% p.a. in 2008 and 1.67% p.a. in 2007. Weighted
average interest rates of the loans due within one year are 2.97% p.a. in 2008 and 2.62% p.a. in 2007.

Repayment schedule of long-term debt as of December 31, 2008, was as follows:

Millions of Yen

Thousands of
U.S. Dollars

2009

¥151

$1,659Year Ending December 31
2010

91

1,000

2011

91

1,000

2012

91

1,000

2013

68

746

Total

¥492

$5,405The carrying amounts of assets pledged as collateral for long-term debt of ¥60 million ($659 thousand) as ofDecember 31, 2008, were as follows:

54

Millions of Yen

Thousands of
U.S. Dollars

Land, property and equipment—net of accumulated depreciation¥193$2,120

Total

¥193

$2,120Financial Section

5. RETIREMENT BENEFITS AND PENSION PLANS
The Company and certain of its consolidated subsidiaries
provide two types of post-employment beneﬁt plans,
namely deﬁned contribution pension plans and deﬁned
beneﬁt pension plans. The latter consists of cash
balance plans, funded non-contributory pension plansand plans provided by the Japan Advertising Industry
Pension Fund, as well as unfunded lump-sum payment
plans under which all eligible employees are entitled to
beneﬁts based on the level of salary, length of services
and certain other factors.

The liabilities for employees’ retirement beneﬁts and pension plans as of December 31, 2008 and 2007 are comprisedof the following. (See the *Remarks below.)Thousands of
U.S. Dollars

Millions of Yen

Projected beneﬁt obligation

2008

20 07

2008

¥11,048¥10,953$121,366(7,897)(8,816)(26,046)

Fair value of plan assets
Unrecognized actuarial differences
Accrued retirement beneﬁts¥(2,371)

(891)

780

¥ 1,246(86,751)$

8,569

The components of net periodic beneﬁt costs for the years ended December 31, 2008 and 2007 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2008

20 07

2008

Service cost

¥ 762

¥ 792

Interest cost

201

195

$ 8,371
2,208

Expected return on plan assets

(132)

(123)

(1,450)

Amortization of actuarial differences

131

104

1,439

Contributions paid during the period, etc.
(See the *Remarks below.)
Net periodic beneﬁts costs
The discount rate used by the Group was 2.0% as of theyears ended December 31, 2008 and 2007. The rate of
expected return on plan assets used by the Group was
1.5% for the years ended December 31, 2008 and 2007.
The estimated amount of retirement beneﬁts to be paid
at the future retirement date is allocated equally to each*Remarks:

978

929

10,743¥1,940¥1,897$21,311service year over the estimated number of total service
years. Unrecognized actuarial differences are amortizedover 13 years on a straight-line basis commencing fromthe succeeding period. Prior service costs are charged
to income when incurred.

For plans provided by the Japan Advertising Industry Pension Fund, the Group cannot technically or reasonably
allocate pension assets and liabilities to the Group’s account. Therefore, the Group recognizes its annual cash
contribution to this fund as its periodical beneﬁt costs, but does not recognize pension assets and liabilities as statedabove.
Contributions paid during the period, etc., stated in the table shown above include the Group’s cash contribution forthe period to the Japan Advertising Industry Pension Fund.
The information of total pension assets and liabilities of the Japan Advertising Industry Pension Fund, the Group’s
share of the contribution to the fund, and the products of pension assets or liabilities and the Group’s share of thecontribution to the fund are as follows. (Note: As stated above, the Group cannot technically or reasonably allocate
pension assets and liabilities to the Group’s account. The product calculation is simply for information purpose only.)

55

ADK Annual Report 2008

a. Total pension assets and liabilities of the fundThousands of
U.S. Dollars

Millions of Yen

March 31,2008
Pension liabilities
Pension assets
Net assets (deﬁcits)

March 31,2007

March 31,2008¥(86,836)¥(65,101)

70,57080,894$(953,927)
775,239¥(16,266)¥ 15,793$(178,688)

April 1, 2007–
March 31, 2008

April 1, 2006–
March 31, 2007

The rate of expected return on plan assets used by the fund was 5.5%.
b. The Group’s share of the contribution to the fund

Share of the Group as employers

9.01%

9.01%

Share of employees

5.54%

5.67%

Total

14.55%

14.68%

c. Products of pension assets or liabilities and the Group’s share of the contribution to the fundMillions of Yen

March 31, 2008

Share of the Groupas employer

Pension liabilities¥(7,824)

Pension assets
Net deﬁcits

Share ofemployees¥(4,807)

6,358

3,907

¥(1,466)¥ (900)Millions of Yen

March 31, 2007

Share of the Groupas employer

Pension liabilities¥(5,867)

Pension assets
Net assets

Share ofemployees¥(3,693)

7,290¥ 1,423

4,588
¥

895

Thousands of U.S. Dollars

March 31, 2008

Share of the Groupas employer

Pension liabilities$(85,949)$(52,806)

69,84542,919$(16,104)$ (9,887)

Pension assets
Net deﬁcits

56

Share ofemployees

Financial Section

d. Supplemental information
The fund’s net pension deﬁcit amount of ¥16,266
million ($178,688 thousand) on March 31, 2008
stated in the item “a” above equals to the sum ofprior service liabilities of ¥7,553 million ($82,973
thousand) and net accumulated deﬁcit carry-forwardof ¥8,712 million ($95,705 thousand). Likewise, thefund’s net pension asset amount of ¥15,793 million
on March 31, 2007 equals to the sum of prior service
liabilities of ¥7,724 million and earnings surplus of¥23,518 million.

Prior service liabilities are amortized over 20 years
by the straight line method at the fund accounting,and the Group expensed an additional contribution of¥111 million ($1,219 thousand) and ¥113 million during
the periods from April 1, 2007 to March 31, 2008 andfrom April 1, 2006 to March 31, 2007, respectively,
for this amortization.

6. CHANGE IN NET ASSETS
The type and number of shares issued and treasury stock as of December 31, 2008 and 2007 were as follows:
Type of sharesissuedType of treasury
stock

2008

Common stock

Common stock

Number of shares as of December 31, 2007

45,155,400

64,297—2,004,159—(1,129)45,155,400

2,067,327

Number of shares increased during the accounting
period ended December 31, 2008
Number of shares decreased during the accounting
period ended December 31, 2008
Number of shares as of December 31, 2008
Notes:

1. Increase in the number of treasury stock was due to the purchase of 2,000,000 shares with an approval of board of
directors meeting and purchase of 4,159 shares of less-than-one-unit shares.
2. Decreases in the number of treasury stock were due to sales of 1,129 shares of less-than-one-unit shares.

Type of sharesissuedType of treasury
stock

2007

Common stock

Common stock

Number of shares as of December 31, 2006

51,655,400

4,558,407—

2,006,087(6,500,000)(6,500,197)

45,155,400

64,297

Number of shares increased during the accounting
period ended December 31, 2007
Number of shares decreased during the accounting
period ended December 31, 2007
Number of shares as of December 31, 2007
Notes:

1. Increase in the number of treasury stock was due to the purchase of 2,000,000 shares with an approval of board of
directors meeting and purchase of 6,087 shares of less-than-one-unit shares.
2. Decreases in the number of treasury stock were due to the cancellation of treasury stock of 6,500,000 shares based on
an approval by the board of directors and sales of 197 shares of less-than-one-unit shares.

57

ADK Annual Report 2008

Information related to dividends for the accounting periods ended December 31, 2008 and 2007, was as follows:
2008
Dividend paid during the accounting period ended December 31, 2008

Resolution

Board of Directors
February 14, 2008

Board of Directors
August 14, 2008

Total amount of dividend¥1,442 million¥440 million

Dividends per share

¥32

¥10

Record date

December 31, 2007

June 30, 2008

Payable date

March 12, 2008

September 16, 2008

Dividend attributable to the performance of the accounting period ended December 31, 2008, but paid after
said accounting period
Board of Directors
February 13, 2008

Resolution
Total amount of dividend¥430 million

Fund of dividend

Retained earnings

Dividends per share¥10

Record date

December 31, 2008

Payable date

March 12, 2009

2007
Dividend paid during the accounting period ended December 31, 2007

Resolution

Board of Directors
February 14, 2007

Board of Directors
August 15, 2007

Total amount of dividend¥800 million¥457 million

Dividends per share

¥17

¥10

Record date

December 31, 2006

June 30, 2007

Payable date

March 13, 2007

September 13, 2007

Dividend attributable to the performance of the accounting period ended December 31, 2007, but paid after
said accounting period

Resolution

58

Board of Directors
February 14, 2008

Total amount of dividend¥1,442 million

Fund of dividend

Retained earnings

Dividends per share¥32

Record date

December 31, 2007

Payable date

March 12, 2008

Financial Section

7. INCOME TAXESThe Company and its domestic consolidated subsidiaries
are subject to corporate, inhabitant and enterprise taxes
based on income. Normal effective statutory tax rates
for these taxes in the aggregate result in approximately
40.69% for 2008 and 2007, respectively, after reﬂectionof the enterprise tax, in the way that such tax should be
deductible for tax purposes only when paid. Overseas
subsidiaries are subject to income taxes of the countries
in which they operate.

The deferred tax assets and liabilities as a result of the tax effects of signiﬁcant temporary differences as ofDecember 31, 2008 and 2007 were as follows:
Thousands of
U.S. Dollars

Millions of Yen

2008

20 07

2008

¥

$ 5,548

Deferred tax assets:
Allowance for doubtful receivables

¥

505

424

Accrued bonuses

36

183

395

Accrued retirement beneﬁts

300

386

3,295

Investment securities

392

403

4,307

424

131

4,657

1,921

—

21,103Tax loss carry-forwards
Unrealized loss on marketable securities
Deferred tax assets in overseas consolidated subsidiaries*

150

43

1,648

Other

929

1,014

10,205
51,158

4,657

2,584

Valuation allowance**

(242)

(117)

(2,658)

Total deferred tax assets

4,415

2,467

48,500

Deferred tax liabilities:
Accrued retirement beneﬁts

94

—

1,032

Unrealized gain on marketable securities

204

13,436

2,241

Deferred tax liabilities in overseas consolidated subsidiaries*

70

3

769

Other

15

—

165

Total deferred tax liabilities
Total net deferred tax liabilities*Remarks:

383

13,4394,207¥4,032¥10,972$44,293

The deferred tax assets and liabilities in overseas consolidated subsidiaries as results of the tax effectsof signiﬁcant temporary differences and losses carry-forward as of the end of ﬁscal years 2008 and2007 were as follows:59

ADK Annual Report 2008

Thousands of
U.S. Dollars

Millions of Yen

2008

20 07

2008

Deferred tax assets:
¥119

¥ 85

Other

Tax loss carry-forwards

31

57

340

Less valuation allowance**

(72)

(99)

(790)

Deferred tax assets

78

43

857

Deferred tax liabilities —Depreciation

69

—

758

—OtherDeferred tax liabilities
Net deferred tax assets$1,307

2

2

22

71

2

780

7

¥ 41

¥

$

77

**Remarks: Valuation allowances shown above are provided for tax loss carry-forwards of certain subsidiaries under
the Group’s tax planning.
Reconciliation between the normal effective statutory tax rate for the years ended December 31, 2008 and 2007
and the actual effective tax rates reﬂected in the accompanying consolidated statements of income were as follows:

Normal effective statutory tax rate

2008

20 07

40.69%

40.69%

10.23

5.61

Certain expenses, including, but not limited to,entertainment expenses, permanently not deductible
for tax purposes
Certain incomes, including, but not limited to, dividend income,permanently not taxable for tax purposes(2.20)(1.41)Per capita levy

0.78

0.29

Tax rate difference applicable to overseas subsidiaries(3.03)—

Other—net(2.98)

1.20

Actual effective tax rate

43.49%

46.38%

8. RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to income for the years ended December 31, 2008 and 2007 were ¥1,084
million ($11,908 thousand) and ¥844 million, respectively.

60

Financial Section

9. LEASES
The Group leases certain computer equipment, ofﬁce
space, vehicles and other assets.
Pro forma information of leased property such as
acquisition cost, accumulated depreciation, obligations
under ﬁnance leases, depreciation expense and interest

expense of ﬁnance leases that do not cause transfer ofownership of the leased property to the lessee on an“as-if-capitalized” basis for the years ended December
31, 2008 and 2007, were as follows:

Millions of Yen

Year Ended December 31, 2008

Acquisition cost
Accumulated depreciation
Net leased property

Furniture andequipment

Machinery andvehicles¥1,801
982
¥ 819

¥33
29
¥ 4

Software

¥395
245
¥150

Total

¥2,2291,256¥ 973

Obligations under ﬁnance leases:
Millions of Yen

Due within one year

¥ 436

Due after one year

574

Total

¥1,010Millions of Yen

Year Ended December 31, 2007

Acquisition cost
Accumulated depreciation
Net leased property

Furniture andequipment

Machinery andvehicles¥2,213
1,292
¥ 921

¥33
23
¥10

Software

¥381
178
¥203

Total

¥2,627
1,493¥1,134

Obligations under ﬁnance leases:
Millions of Yen

Due within one year
Due after one year
Total

¥ 433
732
¥1,16561

ADK Annual Report 2008

Thousands of U.S. Dollars

Year Ended December 31, 2008
Acquisition cost
Accumulated depreciation
Net leased property

Furniture andequipment

Machinery andvehicles$19,784
10,787$ 8,997

$362
318
$ 44

SoftwareTotal$4,3392,691$1,648$24,485
13,796$10,689

Obligations under ﬁnance leases:
Thousands of U.S. Dollars

Due within one year

$ 4,790

Due after one year

6,305

Total

$11,095

Breakdown of lease payments, or depreciation expense and interest expense under ﬁnance leases:
Thousands of
U.S. Dollars

Millions of Yen

2008

20 07

2008

Total lease payments

¥490

¥603

$5,382

Depreciation expense

474

580

5,207

Interest expense

23

23

252

Depreciation expense and interest expense, which are not reﬂected in the accompanying consolidated statements ofincome and retained earnings, are computed by the straight-line method and the interest method, respectively.

Obligations under operating leases:
Thousands of
U.S. Dollars

Millions of Yen

2008
Due within one year
Due after one year
Total

62

¥ 566
4,019
¥4,585

20 07
¥158
164
¥322

2008
$ 6,218
44,150$50,368

Financial Section

10. CONTINGENT LIABILITIESAs of December 31, 2008, the Group had the following contingent liabilities:
Guarantee Obligations:
Millions of Yen

Aggregated amount of guarantees for debts owed by subsidiaries
and afﬁliates and payables by a client, Mindshare Japan¥544

Thousands of
U.S. Dollars$5,976

Other contingent liability:
In September 2005, a former client ﬁled a lawsuit against one of the Company’s consolidated subsidiaries and fourother companies and ﬁve individuals seeking demands in excess of $12.5 million in connection with the subsidiary’s
and the other defendants’ advertising business. The subsidiary and its legal counsel ﬁled a motion to dismiss thecomplaint in November 2005. The court heard oral arguments on the motion in January 2006 and has not yet issued
a ruling.

63

ADK Annual Report 2008

11. DERIVATIVESThe Group enters into foreign exchange forward
contracts to hedge foreign exchange risk associatedwith certain assets and liabilities denominated in foreign
currencies. The Group does not hold or issue derivatives
for trading or speculative purposes.
Because the counterparties to these derivatives
are limited to major sound ﬁnancial institutions, theGroup does not anticipate any losses arising from credit
risk.
Derivative transactions entered into by the Group
have been made in accordance with internal rules andpolicies which regulate the authorization and exposure
limit amount.

The notional amounts, fair values and unrealized gain and loss on derivatives as of December 31, 2008 and 2007,
were summarized as follows:
Millions of Yen

Year Ended December 31, 2008
Currency:
OTC market
Foreign exchange forward contracts— Buying (US$)
Total

Notional
amounts¥283

Due after
one year

Fair value

¥212

¥230

Unrealized gain
(loss)

¥(48)
¥(48)

Millions of Yen

Year Ended December 31, 2007
Currency:
OTC market
Foreign exchange forward contracts— Buying (US$)
Swaps
Total

Notional
amounts

¥ 354
1,417

Due after
one year

Fair value

¥283
—

¥339
0

Unrealized gain
(loss)

¥(5)
0
¥(5)

Thousands of U.S. Dollars

Year Ended December 31, 2008

Notional
amounts

Due after
one year

Fair value

Unrealized gain
(loss)

Currency:
OTC market
Foreign exchange forward contracts— Buying (US$)$3,108$2,328Total

Derivative transactions which were accounted for by hedge accounting were excluded.

64$2,526$(527)$(527)

Financial Section

12. SEGMENT INFORMATION
Information about business segments, geographic segments and billings to foreign customers of the Group for theyears ended December 31, 2008 and 2007, was as follows:(1) Business Segment Information
Business segment information for the years ended December 31, 2008 and 2007 was as follows:a. Billings and Operating Income
Millions of Yen

Advertising

Nonadvertising

Billings to customers¥391,229¥8,223¥399,452—

Inter-segment billings

29

170

199

¥(199)—

391,258

8,393

399,651(199)

399,452

2008

Total billings
Operating expenses

387,510

Operating income

¥

3,748

8,438
¥

(45)

Total

Eliminations
or corporate

Consolidated¥399,452

395,948(195)

395,753

¥

¥

¥

3,703

(4)

3,699

Millions of Yen

Advertising

Nonadvertising

Billings to customers¥426,402¥8,609¥435,011—

Inter-segment billings

37

222

259

¥(259)—

426,4398,831

435,270(259)

435,0112007

Total billings
Operating expenses

419,300

Operating income

¥

7,139

8,835
¥

(4)

Total

Eliminations
or corporate

Consolidated¥435,011

428,135(258)

427,877

¥

¥

¥

7,135

(1)

7,134

b. Assets, Depreciation and Capital Expenditures
Millions of Yen

2008
AssetsDepreciation
Capital expenditures

Advertising

Nonadvertising¥182,633¥9,536

764

39

2,060

5

Advertising

Nonadvertising¥236,659¥9,703

1,130599

Eliminations
or corporate

Consolidated¥192,169¥(387)¥191,782

803

—

803

2,065

—

2,065

Total

Millions of Yen

2007
AssetsDepreciation
Capital expenditures

Eliminations
or corporate

Consolidated¥246,362¥(265)¥246,097

40

1,170

—

1,170

8

607

—

607

Total

65

ADK Annual Report 2008

a. Billings and Operating Income
Thousands of U.S. Dollars

Advertising

2008

Nonadvertising

Total

Eliminations
or corporate

Consolidated—$4,388,135

Billings to customers$4,297,802

Inter-segment billings

319

1,867

2,186

$(2,186)—

4,298,121

92,2004,390,321(2,186)

4,388,135

4,349,642(2,142)

4,347,500

Total billings$90,333 $4,388,135

Operating expenses

4,256,948

92,694

Operating income$$

41,173(494) $

40,679$(44) $

40,635b. Assets, Depreciation and Capital Expenditures
Thousands of U.S. Dollars

2008
AssetsAdvertising

Nonadvertising

Total

Eliminations
or corporate

Consolidated$2,006,294$104,757$2,111,051

Depreciation

8,393

428

8,821

$(4,251) $2,106,800
—

8,821

Capital expenditures

22,63055

22,685—22,685

Notes: 1. The Group is engaged primarily in the advertising industry. The two business segments, namely, advertising services andnon-advertising, consist primarily of the following services:
Advertising services: Planning, creating, producing and placing advertising in various media such as television, radio,
newspapers, magazines, public transportation, billboards, and digital media. Additional services such as marketing andbranding consultation, design and production of sales promotion programs, and event marketing.
Non-advertising: Publishing and selling of magazines and books and information processing services.
2. Consolidated operating expenses are equal to the total of cost of sales and selling, general and administrative expenses
shown in the accompanying consolidated statements of income and retained earnings.

(2) Geographic Segment Information
Because the billings and total assets of the foreign
operations of the Group for the years ended
December 31, 2008 and 2007 were less than 10%of those of the total consolidated operation, suchsegment information is not presented.

66(3) Billings to Foreign Customers
Since the billings to foreign customers of the Groupfor the years ended December 31, 2008 and 2007,
were 6.2% and 7.2%, respectively, or less than 10%of the total consolidated billings in the two periods,
such information is not presented.

Financial Section

INDEPENDENT AUDITORS’ REPORTThe Board of Directors
ASATSU-DK INC.:
We have audited the accompanying consolidated balance sheets of ASATSU-DK INC. andconsolidated subsidiaries as of December 31, 2008 and 2007, and the related consolidated
statements of income, changes in net assets and cash flows for the years then ended, all expressedin Japanese yen. These consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to independently express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of ASATSU-DK INC. and consolidated subsidiaries as ofDecember 31, 2008 and 2007, and the consolidated results of their operations and cash flows forthe years then ended, in conformity with accounting principles generally accepted in Japan.
Our audit also comprehended the translation of Japanese yen amounts into U.S. dollar amounts
and, in our opinion, such translation has been made in conformity with the basis stated in Note 1.
Such U.S. dollar amounts are presented solely for the convenience of readers outside Japan.

Yasumori Audit Corporation
Certified Public Accountants
March 28, 200967

ADK Annual Report 2008

Securities Holdings
ASATSU-DK INC. Consolidated Investments as of December 31, 2008
Millions of Yen

2008
Current

Bond investment trust/Money market fund
Bonds
Mutual funds in equities and bonds and others

Non-Current¥ 1,125
1,471

10 funds

822

11 funds

Total¥ 3,419

WPP plc.

¥16,605

2.49% or 31,295,646 stocks

Digital Advertising Consortium Inc.

2,024

Equity method

Other publicly traded equities

13,227140 issues

Publicly traded equities total

31,857

Non-publicly traded equities in affiliate companies

4,410

12 issues

Non-publicly traded equities in subsidiary companies

565

20 issues

Other non-publicly traded equities

1,451

73 issues

Non-publicly traded equities total

6,426

Bonds

3,396

19 issues

245

8 issues

Mutual funds in equities and bonds and others
Total non-current investments in securities¥ 3,641

Investments in affiliated companies (non-securities)

315

8 funds

Investments in funds (non-securities)

118

7 funds

Total non-current investments¥42,360

Millions of Yen

Top Five Equities by Balance
WPP plc.

68

2008¥16,605

31,295,646 shares

ASAHI BREWERIES, Ltd.

1,539

1,000,000 shares

Tokyo Broadcasting System, Incorporated

1,340

982,900 shares

Shiseido Co., Ltd.

762

417,597 shares

Shochiku Co., Ltd.

691

1,100,000 sharesFinancial Section

Investor Information(As of December 2008)

Parent company nameASATSU-DK INC.

EstablishedMarch 19, 1956

Head office13-1, Tsukiji 1-chome, Chuo-ku, Tokyo 104-8172, Japan

Number of employees

3,264 (consolidated basis)2,034 (non-consolidated basis)

Common stock

Authorized: 206,000,000 shares
Issued: 45,155,400 shares

Number of shareholders 9,618

Percentage of Total Shares Issued��������������

��������������������������

������

����������������������

������

��������������������

��������������������������������

�����������������
��������

����������

������

Percentage of Ownership Voting*Major shareholders

WPP International Holding B.V.

23.98%

Northern Trust Company AVFC Re U.S. Tax-Exempted Pension Funds

5.72%

Northern Trust Company (AVFC) Sub Account American Client

5.69%

Mellon Bank N.A. Treaty Clients Omnibus

4.29%

The Silchester International Investors International Value Equity Trust

3.88%

Japan Trustee Service Bank, Ltd. (trust a/c 4G)

3.87%

Masao Inagaki

3.81%

CBNY-Third Avenue International Val. Fund

3.05%

The Master Trust Bank of Japan, Ltd., Retirement Benefit Trust Account(Mitsubishi Corporation Account)

1.78%

J.P. MORGAN CLEARING CORP-SEC

1.62%* Percentage of Ownership Voting figures are based on 43,088,073 shares (45,155,400 shares issued andoutstanding, minus 2,067,327 shares of treasury stock).

Stock listing

Tokyo Stock Exchange, First Section

Securities code

9747

Transfer agent

Tokyo Securities Transfer Agent Co., Ltd.
6-2, Otemachi 2-chome, Chiyoda-ku,
Tokyo 100-0004, Japan

Annual meeting

The annual meeting of shareholders is normallyheld in March in Tokyo, Japan.

For further information

ASATSU-DK INC. Office of Corporate Communications
Tel.: +81-3-3547-2003
URL: http://www.adk.jp/english/index.html

69

ADK Annual Report 2008

ADK Group Network

DOMESTICANIMATION CONTENT GROUPEUROPEAGENCY GROUP

Nihon Ad Systems Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2183
Fax: +81-3-3547-2098

Frankfurt
Asatsu (Deutschland) GmbH … ■Waldschmidtstrasse 19
60316 Frankfurt,Frankfurt am Main Germany
Tel.: +49-6997-120-832
Fax: +49-6997-120-821

ADK International Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3546-9100
Fax: +81-3-3546-9208
ADK Dialog Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-5163
Fax: +81-3-3547-5152
ADK Interactive Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2780
Fax: +81-3-3547-2087
Digital Advertising Consortium Inc. … ❑20-3, Ebisu 4-chome,
Shibuya-ku, Tokyo 150-6033
Tel.: +81-3-5449-6200
Fax: +81-3-5449-6201

Right Song Music Publishing Co., Ltd.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2184
Fax: +81-3-3547-2098
Eiken Co., Ltd. … ■56-7, Minamisenjyu 6-chome,
Arakawa-ku, Tokyo 116-0003
Tel.: +81-3-3802-3011
Fax: +81-3-3807-6205
PUBLISHING GROUP

Kyowa Kikaku Ltd. … ■20-15, Shimbashi 2-chome,
Minato-ku, Tokyo 105-0004
Tel.: +81-3-3571-3111
Fax: +81-3-3571-3314

Nihonbungeisha Co., Ltd. … ■1-7, Kanda-Jimbo-cho,
Chiyoda-ku, Tokyo 101-0051
Tel.: +81-3-3294-7771
Fax: +81-3-3294-7780

ASP Co., Ltd.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2100
Fax: +81-3-3547-2937

Neo Shobo Inc. … ■6-7, Shimbashi 1-chome,
Minato-ku, Tokyo 105-0004
Tel.: +81-3-3573-1277
Fax: +81-3-3574-8165

AD&M Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3524-5056
Fax: +81-3-3524-5058

Information Processing Service

CREATIVE GROUPADK Arts Inc. … ■1-1, Tsukiji 4-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-5016
Fax: +81-3-3545-5075
Boys Inc. … ■13-13, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3545-1071
Fax: +81-3-3545-1305
Drill Inc.
19-5, Udagawa-cho,Shibuya-ku, Tokyo 150-0042
Tel.: +81-3-5428-8771
Fax: +81-3-5428-8772

70Super Vision, Inc.
13-1, Tsukiji 1-chome,
Chuo-ku, Tokyo 104-0045
Tel.: +81-3-3547-2156
Fax: +81-3-3547-2098

Nippon Information Industry Corp. … ❑1-4, Shibuya 3-chome,
Shibuya-ku, Tokyo 150-0002
Tel.: +81-3-3409-9411
Fax: +81-3-3409-3785

OVERSEASNORTH AMERICANew York
ADK America Inc. N.Y. … ■515 W. 20th St., 6F,
New York, NY 10011, U.S.A.
Tel.: +1-646-284-9800
Fax: +1-646-284-9825
Los Angeles
ADK America Inc. L.A.
970 W. 190th St. #710,
Torrance, CA 90502, U.S.A.
Tel.: +1-310-630-3600
Fax: +1-310-630-3620

Amsterdam
ADK Europe B.V. … ■Neptunusstraat 31,
2132 JA Hoofddorp, The Netherlands
Tel.: +31-23-554-3530
Fax: +31-23-554-3553
Knots Europe B.V.
Neptunusstraat 31,
2132 JA Hoofddorp, The Netherlands
Tel.: +31-23-554-3554
Fax: +31-23-554-3553
Paris
ADK France S.A.S.
352 Rue Saint-Honore,
75001 Paris, France
Tel.: +33-1-5345-3450
Fax: +33-1-5345-3455
ASIA
Beijing
Beijing Huawen-Asatsu International
Advertising Co., Ltd.
Room 1216, Spaces International Center,
No. 8 Dongdaqiao Road,
Chaoyang District,
Beijing 100020, P.R.C.
Tel.: +86-10-5870-3636
Fax: +86-10-5870-3628
Tiexu Advertising Co., Ltd.
18F, Golden Land Bldg.,
No. 32 Liangmaqiao Road,
Chaoyang District,
Beijing 100016, P.R.C.
Tel.: +86-10-6464-2122
Fax: +86-10-8448-3324
Beijing Dai-Ichi Kikaku AdvertisingCo., Ltd.
C-3, Huitong Office Park,
No. 71 Jianguo Road,
Chaoyang District,
Beijing 100025, P.R.C.
Tel.: +86-10-8599-7788
Fax: +86-10-8599-7579
Beijing DongFang SanMeng Public
Relations Consulting Co., Ltd.
Room 828, Beijing Capital Times Square,No. 88 Xichang’an Ave., Xicheng District,
Beijing 100031, P.R.C.
Tel.: +86-10-8391-3389
Fax: +86-10-8391-3399

ADK Group Network(As of April 2008)

Shanghai
Shanghai Asatsu Advertising Co.,
Ltd. … ■10F, Yongxing, Mansion,
No. 887, Huaihai Zhong Lu,
Shanghai 200020, P.R.C.
Tel.: +86-21-6467-4118
Fax: +86-21-6474-7803
Asatsu Century (Shanghai)
Advertising Co., Ltd. … ■9F, Yongxing, Mansion,
No. 887 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6474-8908
Fax: +86-21-6474-8909
Beijing DongFang SanMeng Public
Relations Consulting Co., Ltd.
Shanghai Branch
Room 1205 Yongxing, Mansion,
No. 887 Huaihai Road (M),Shanghai 200020, P.R.C
Tel.: +86-21-6433-9623
Fax: +86-21-6443-9705
Asatsu (Shanghai) Exposition &Advertising Co., Ltd.
23F, Jiushifuxing Mansion,
No. 918 Huaihai Road (M),Shanghai 200020, P.R.C.
Tel.: +86-21-6415-5881
Fax: +86-21-6271-3651
Guangzhou
Guangdong Guangxu (Asatsu)
Advertising Co., Ltd. … ❑26F, Telecom Plaza,No. 18 Zhang Shan Er Road,
Guangzhou 510081, P.R.C.
Tel.: +86-20-8888-9818
Fax: +86-20-8888-9815
Shanghai Asatsu Advertising Co., Ltd.
Guangzhou Branch
Room 1202, B Tower, Victory Plaza,No. 103 Tiyuxi Road,
Guangzhou 510620, P.R.C.
Tel.: +86-20-8527-2425
Fax: +86-20-8527-6536
ChengduShanghai Asatsu Advertising Co., Ltd.
Chengdu Branch
Room 1502, No. 16 Hongxing Road,
Sec. 3, Chengdu 610016, P.R.C.
Tel.: +86-28-8666-5471
Fax: +86-28-8672-5017
FuzhouFujian ASATSU-DK Ltd.
15F, JianYin Bldg., 68 JingDa Road,
GuLou District, Fuzhou 350001, P.R.C.
Tel.: +86-591-8801-2100
Fax: +86-591-8801-2108
Hong KongASATSU-DK HONG KONG LTD. … ■25F, Leighton Centre, 77 Leighton Road,
Causeway Bay, Hong Kong
Tel.: +852-2895-8111
Fax: +852-2576-3322

DK ADVERTISING (HK) LTD. … ■25F, Leighton Centre, 77 Leighton Road,
Causeway Bay, Hong Kong
Tel.: +852-2811-9999
Fax: +852-2811-9699
Taipei
United-Asatsu International Ltd. … ■13F, No. 287 Nanking E. Road,
Sec. 3, Taipei 105, Taiwan, R.O.C.
Tel.: +886-2-8712-8555
Fax: +886-2-8712-9555
DIK-OCEAN Advertising Co., Ltd. … ■13F, No. 287 Nanking E. Road,
Sec. 3, Taipei 105, Taiwan, R.O.C.
Tel.: +886-2-8712-8555
Fax: +886-2-8712-9555
Singapore
ASATSU-DK SINGAPORE PTE. LTD. … ■1 Liang Seah Street, #02-05,
Singapore 189022
Tel.: +65-6333-5115
Fax: +65-6333-5225
Scoop AD WORLD Pte Ltd
37 Beach Road, #2-02,
Singapore 189678
Tel.: +65-6336-2346
Fax: +65-6336-1982
IMMG Pte Ltd
213 Henderson Industrial Road, #01-09,
Henderson Industrial Park,
Singapore 1595535
Tel.: +65-6376-5088
Fax: +65-6375-2029
Jakarta
PT. Asta Atria Surya
Wisma Slipi, Lantai 11 Jl. Let.
Jend. S. Parman Kav. 12,
Jakarta 11480, Indonesia
Tel.: +62-21-530-7155
Fax: +62-21-530-7156
PT. Perdana IMMG Indonesia
Jl. Kemang No. 5,
Jakarta Selatan 12730, Indonesia
Tel.: +62-21-718-3311
Fax: +62-21-718-3322
Kuala Lumpur
ASATSU-DK Malaysia Sdn. Bhd.
Level 18, Menara Merais, No. 1,
Jalan 19/3, 46300 Petaling Jaya,
Selangor, Malaysia
Tel.: +603-7954-0388
Fax: +603-7954-0266
Bangkok
ASATSU (THAILAND) CO., LTD. … ■24F, Sirinrat Bldg.,
3388/86 Rama 4 Road, Klongton,
Klongtoey, Bangkok 10110, Thailand
Tel.: +66-2-367-5951
Fax: +66-2-367-5946

DAI-ICHI KIKAKU (THAILAND) CO., LTD. …
■
23F, Shinawatra Tower III, 1010
Vibhavadi Rangsit Road, Ladyao,
Chatuchak, Bangkok 10900, Thailand
Tel.: +66-2-949-2700
Fax: +66-2-949-2777
ASDIK Ltd. … ■6F, Shinawatra Tower III, 1010
Vibhavadi, Rangsit Road, Ladyao,
Chatuchak, Bangkok 10900, Thailand
Tel.: +66-2-949-2800
Fax: +66-2-949-2805
Ho Chi Minh CityASATSU-DK VIETNAM INC.
28 Nguyen Van Thu St.,
District 1, Ho Chi Minh City, Vietnam
Tel.: +84-8-3910-5550
Fax: +84-8-3910-5551
SOL Advertising Company
28 Nguyen Van Thu St.,
District 1, Ho Chi Minh City, Vietnam
Tel.: +84-8-3910-5550
Fax: +84-8-3910-5551
ManilaASATSU-DK INC.
Philippine Representative Officec/o Catalytx Advertising,
9F, Raffles Corporate Center,
F. Ortigas, Jr. Road (formerly EmeraldAve.), Ortigas Center, Pasig City 1605,
Philippines
Tel.: +63-2-914-4297
Fax: +63-2-914-9001
Seoul
ASATSU-DK Korea
83-25, 3F, Yellow Bldg., Nonhyon-Dong
Kangnam-Gu, Seoul 135-010, Korea
Tel.: +82-2-511-5934
Fax: +82-2-511-5935
New Delhi
ADK-FORTUNE PVT. LTD.
B1/B2 Enkay Centre, Udyog Vihar
Phase-V, Gurgaon 122016, India
Tel.: +91-124-453-9723
Fax: +91-124-453-9752
Dubai
AGA ADK advertising & marketing
7F, Al Sufouh Tower,
Office No. 701, Dubai Media City,
Dubai United Arab Emirates
Tel.: +971-4-4278-722
Fax: +971-4-4278-721… ■ Consolidated subsidiaries… ❑ Affiliates accounted for by theequity method71

ASATSU-DK INC.

http://www.adk.jp/english/index.html

Printed in Japan